Regional Integrations

Major Developments Favoring Free

Trade
The emergence of the World Trade Organization (WTO)

Defining regionalism
Refers to a formal process of
intergovernmental collaboration between
two or more states (Ravenshill, 2005).
Regions are social constructions, and can
be viewed as a particular scale of activity
that is bounded or has borders to define
those in and those out (Brenner, 2004)
Bilateral agreements are also considered
as regional agreements by the WTO

Why Regionalism?
Political reasons
economic cooperation and confidence building, security,
bargaining tool, a means of locking in reform; satisfy
domestic political constituencies, ease of negotiating and
implementing agreements
Economic reasons
access to a larger domestic market, attract additional
foreign direct investment (FDI), protect sensitive
industries, engage in deeper integration
Cultural/Political
Forge an identity (cf. European identity, African identity) on
behalf of the constituent nation

A Hierarchy of Regional Economic Integration Initiatives

Free Trade
Area
Customs
Union
Common
Market
Economic
Union

Elimination of
Trade Barriers

+ Common External
Trade Positions

+ Labor/Capital
Mobility

+ Coordinated Economic
and Fiscal Policy

Political
Union

+ Coordinated Political
and Social Policy

Types of Trade Blocs

Level of
Integration

No Tariffs and
Quotas

Common
Tariffs and
Quotas

No
Restrictions
on Factor
Movements

Harmonized/u
nified Eco.
Policies &
Institutions

Unified Eco. &

Political
Policies &
Institutions

Free Trade
Area

Yes

No

No

No

No

Customs
Union

Yes

Yes

No

No

No

Common
Market

Yes

Yes

Yes

No

No

Economic
Union

Yes

Yes

Yes

Yes

No

Political
Union

Yes

Yes

Yes

Yes

Yes

New Regionalisms
Responses to globalisation
1989 APEC Asia Pacific
Economic Cooperation

1992 EC/EU Maarstrict Treaty

1991 Mercosur Souther

Common Market

1994 North American Free Trade

Agreement

2001 NEPAD New Partnership for

African Development

Major Regional Economic Agreement

Initiatives
The North American Free Trade Agreement
(NAFTA)
U.S.A, Canada, and Mexico
Went into effect on January 1, 1994
Proposal to expand NAFTA to include all countries in the
Western Hemisphere, except Cuba
This region accounts for 37% of all U.S. trade, $155 billion in
American investment, 800 million people, and a $13 trillion
economy

The Association of Southeast Asian Nations

(ASEAN)

Indonesia, Malaysia, Philippines, Singapore, Thailand,

Brunei Darussalam, Vietnam, Laos, Myanmar, and
Cambodia
Total population of 500 million, area of 4.5 million
square kilometers, GDP of U.S. $737 billion, a total
trade of U.S. $ 720 billion

Mercado Comun del Sur (MERCOSUR)

- Argentina, Brazil, Paraguay, and Uruguay

Market of nearly 200 million people

Area of about 12.5 million square miles
Combined gross regional product in excess of $800 billion
Latin Americas largest industrial base

The European Union (EU)

-The European Union (EU) is a political and economic
union of 27 member states located primarily in
Europe
-It was established by the Treaty of Maastricht in 1993
upon the foundations of the pre-existing
European Economic Community.
- With almost 500 million citizens, the EU combined
generates an estimated 30% share of the world's
nominal GDP( US$16.8 trillion in 2007).
-The European Union's activities cover all areas of
public policy, from health and economic policy to
foreign affairs and defence.
-The most important EU institutions are the Council
of the European Union the European
Commission the European Parliament and the
European Court of Justice .

APEC

-Asia-Pacific Economic Cooperation (APEC) is a group of

Pacific Rim countries who meet with the purpose of improving
economic and political ties. It holds annual meetings in each of the
member countries and has standing committees on a wide range of
issues, from communications to fisheries and education and
training.
-Currently, most countries (21 in all) with a coastline on the Pacific
Ocean are members of the organization; they include USA, Japan,
Australia, Canada, Singapore, Malaysia, Indonesia, China, Russia,
Chile

Regional Economic Integration Benefits

Removal of Trade
And Investment
Barriers

Competition Increases/
More Investors

Industry
Innovation
Increases

Initial Costs Drop

Prices Drop

New Product
Development

New Process
Development

Reallocation/Consolidation
of Resources
(Comparative Advantage)

Demand Increases

Production
Levels Rise

Economies of
Scale Benefits

Lower Costs
And
Supply-Side Led
Growth