Question

In: Economics

There are some 200 economic integration agreements in effect around the world already, far more than...

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?

Solutions

Expert Solution

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.


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