In: Economics
There are some 200 economic integration agreements in effect around the world already, far more than even a few years ago. Virtually every country is now party to one or more free trade agreements. Differentiate among the five levels of economic and political integration for regional trading blocs. Why do certain regional integration agreements, like the South Asian Association for Regional Cooperation, fail?
Economic and political integration can be classified into five
levels. They are;
Free trade: Free trade ensure through reducing or abolishing tax
rates. To attain free trade some countries reduce the tariff rates.
Every country should keep its own tariff with regard to third
countries. The free trade will develop the economies of scale and
the comparative advantage. This will promote economic
efficiency.
Custom union: A common trade regime achieved through common
external tariff among member countries, same tariff for third
countries. This custom union helps to increase the competitive
playing field and also address the problem of re-exports.
Common market: There should me common market for the services and
this will enhance the free capital movement, within the countries.
Among this each national market has its own regulations like
product standards.
Economic union: Creation of uniform market through avoiding all the
tariff removal between member countries. This will enable free
movement of labours, like workers can move and work in another
country. The political integration attained through the
harmonisation of monetary and fiscal policies between the member
states. Use of common currency shows the union of economy.
Political union: This is the more advanced form where there is a
common government were the sovergnity of the member countries
reduced.
This integration will lead to the emergence of numeral set of
regulations, enforcement, arbitration and its mechanism. This
integration will reduce the soverngnity of the members, and also no
longer judged to be acceptable by its member.
Among this integration, there are several failures were emerged
among the organisations like SAARC. SAARC aimed for the integration
of south Asian nations to undertake collective efforts to achieve
common objective like regional stability and prosperity. There is a
high level of poverty existing among the member countries. There
are several internal crisis between the members regarding language
problems, cultural and racial problems, terrorism constitutional
crisis etc. There is hegemony of some powerful countries among the
organisation.