Question

Explain the pros and cons of regional integration and defend your position regarding regional integration.

sources: introduction to global business ch.3

Answer 1

Regional Integration means unification of two or more nations. In this two or more nations come together and enter into some agreement or association to achieve economic growth, prosperity , stability, peace and holistic development.

North American Free Trade Agreement (NAFTA) An Agreement signed by Canada, Mexico and United States to reduce trade barriers and promote free trade.

Association of South East Asian Nations (ASEAN) An association of 10 countries which include Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam. The main purpose of this integration is social , economic and cultural Development.

Pros of Regional Integration:

• Regional Integration helps to boost trade.Elimination of trade barriers , simplification of import and export procedures, access to large markets helps in increasing production and sales. This helps in economic growth and increase in GDP.
• Promote Tourism and Cultural Development. The integrated nations not only focus on trade but also cultural relations. As a result tourism among these nations increase which result in economic growth.
• Globalization of trade results in increase in competition and this further leads to production and sale of enhanced quality products and services.

Cons of Regional Integration:

• Regional Integration may lead to losses also due to trade diversion. Trade gained from member countries may be less as compared with trade gained from non member countries which were trading partners earlier. This may lead to losses.
• The Foreign Investments by non member countries may decline as tariffs for them are not being reduced.
• The production cost may rise as it may be more expensive to produce in a member country while producing outside the member country may be cheap . As a result the price of products will increase.
• The relationship with non members may be spoiled which may lead to enmity and threat to security.