The advantages of economic integration 1.

Trade creation: Trade creation occurs when consumption shifts from a high cost producer to a low cost producer. Economic integration increases specialization by removing trade barriers and by encouraging specialization, it enables a shift in production from high cost to low cost countries. If, for example, Uganda is the most efficient producer of sugar in the East African region, after joining the EAC Rwanda consumers start accessing cheaper Uganda sugar that they were not accessing before the economic integration. 2. Economic integration increases the variety of products available to consumers in member states. Removal of trade barriers enables consumers to have a variety of commodities from which to choose. Local consumers are no longer restricted to consuming local products. Increased variety and consumer choice improve peoples standard of living. 3. Member countries enjoy economies of scale: Economic integration enables member countries to expand the scale of production and enjoy economies of scale because of the expanded market. For example, a factory in Rwanda gets access to markets in Uganda and Tanzania and so it enjoys economies of scale. 4. Attracting Direct Foreign Investment (DFI): Investors are attracted by large markets. Small and

fragmental national markets are usually not sufficient to attract huge investments. Economic integration makes the region a huge market which foreign investors find attractive. 5. Economic integration improves bargaining power: A group of countries acting together improves their bargaining power in trade agreements with other countries and trade blocs. A common policy and common stand enables the group of countries to integrate to achieve more than they would if the individual countries bargain individually. 6. Economic integration Reduces problems of exchange rates: Economic integration enables member countries to use the same currency through out the region. This eliminates the need for converting currencies for cross border trade. For example, when the East African countries decide to use the same currency, a trader in Kenya can use the same currency in Uganda, Rwanda, Tanzania and Burundi. This speeds up trade and because there is one currency acceptable throughout the region, exchange of goods and services is made easier. Lastupdated:January2012 7. Integration encourages specialization: The knowledge that a country will be able to freely export surplus output to its trading partners encourages specialization which greatly improves the efficiency and quality of output produced.

8. Employment due to movement of factors of production: The free movement of factors of production in an integrated region enables unemployed factors of production to find employment in other countries. 9. Lower costs of research and joint utilities: When countries integrate, they are able to undertake very costly projects that they would not have afforded individually. This enables them to undertake costly research, develop better and modern infrastructures and services. 10. No duplication in resource use: In the absence of integration, countries end up duplicating industries and infrastructure because they want to be self-reliant. With economic integration, there is no wasteful duplication. Countries develop and use common infrastructure and services. For example, if the entire member countries can be adequately served by one hydroelectric power dam, the other countries will have to use the funds to set up something else other than having to put up their own hydro power plants yet they can get power from the other countries. 11. Increases competition: With many firms from the member countries competing for the market without restrictions, firms are forced to improve on quality and sell at lower prices. Firms must devise the most efficient methods of production so as to favorably compete. Integration therefore promotes efficiency.

12. Peace and security: Economic integration promotes peace and security within the region. A country will find it difficult to wage war against a fellow member state. There are also many structures aimed at resolving conflicts amicably without resorting to war.