Economic integration

Economic integration

Introduction	Describes a process whereby countries coordinate and link their economic policies. As the degree of economic integration increases, the trade barriers between countries decrease and their fiscal and monetary policies start to synchronize.
Trading blocs	Defines as a group that joins together in some form of agrement in order to increase trade between themselves sic stage ·         Preferential trading areas A trading bloc that gives preferential access to certain products from certain countries. Usually carried out by reducing (but not eliminating) tariffs. ·         free trading areas When countries agree to trade freely within the FTA, but are able to trade with countries outside the FTA in whatever way they wish. ·         Custom unions When countries agree to trade freely within the CU, and also agree to adopt common external barriers against any country attempting to import into the Customs Union. All common markets and economic and monetary unions are also customs unions, thus the EU is customs union [plus a common market]. ·         Common markets Common markets are customs unions with common policies on product regulation & free movement of goods, services, capital and labor. The best known example of a common market is the EU. ·         Economic and monetary union An economic and monetary union is a common market with a common currency. The best example of an economic and monetary union is the Eurozone, which includes EU member countries that have adopted the Euro as their currency. ·         Complete economic integration This would be the final stage of economic integration Individual countries involved would have no control of economic policy, full monetary union, and complete harmonization of fiscal policy. This is what the Eurozone is moving toward.
An evaluation of trading blocs	Depends on degree of integration •       Benefits in economic terms include: §  greater size of market with the potential for larger export markets §  increased competition leading to greater efficiency §  more choice §  lower prices for consumers •       Consequences are uneven §  Some domestic producers will gain from a larger market while others may not be able to compete.
Trade creation and trade diversion	Trade creation- Trade diversion-