Question

Please I want a well-detailed answer to this question

What are some of the political and economic benefits of global economic integration? Why is so much pressure to favor regionalism appears to be emerging?

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Answer 1

Economic Integration:

Economic integration is an arrangement among nations that typically includes the reduction or elimination of trade barriers and the coordination of monetary and fiscal policies. Economic integration aims to reduce costs for both consumers and producers and to increase trade between the countries involved in the agreement.

When economies agree on integration, trade barriers fall and economic and political coordination increases.

Specialists in this area define seven stages of economic integration: a preferential trading area, a free trade area, a customs union, a common market, an economic union, an economic and monetary union, and complete economic integration. The final stage represents a total harmonization of fiscal policy and a complete monetary union.

• Economic integration, is an agreement among nations to reduce or eliminate trade barriers and agree on fiscal policies.
• The European Union, for example, represents a complete economic integration.
• Strict nationalists may oppose economic integration due to concerns over a loss of sovereignty.

The advantages of economic integration fall into three categories: trade benefits, employment, and political cooperation.

More specifically, economic integration typically leads to a reduction in the cost of trade, improved availability of goods and services and a wider selection of them, and gains in efficiency that lead to greater purchasing power.

Employment opportunities tend to improve because trade liberalization leads to market expansion, technology sharing, and cross-border investment.

Political cooperation among countries also can improve because of stronger economic ties, which provide an incentive to resolve conflicts peacefully and lead to greater stability.

Below are some Political and Economic Advantages of Global Integration:

1. The proponents say globalization represents free trade which promotes global economic growth; creates jobs, makes companies more competitive, and lowers prices for consumers.

2. Competition between countries is supposed to drive prices down. In many cases this is not working because countries manipulate their currency to get a price advantage.

3. It also provides poor countries, through infusions of foreign capital and technology, with the chance to develop economically and by spreading prosperity, creates the conditions in which democracy and respect for human rights may flourish. This is an ethereal goal which hasn’t been achieved in most countries

4. According to supporters globalization and democracy should go hand in hand. It should be pure business with no colonialist designs.

5. There is now a worldwide market for companies and consumers who have access to products of different countries.

6. Gradually there is a world power that is being created instead of compartmentalized power sectors. Politics is merging and decisions that are being taken are actually beneficial for people all over the world. This is simply a romanticized view of what is actually happening. True

7. There is more influx of information between two countries, which do not have anything in common between them. True

8. There is cultural intermingling and each country is learning more about other cultures.

9. Since we share financial interests, corporations and governments are trying to sort out ecological problems for each other. –

10. Socially we have become more open and tolerant towards each other and people who live in the other part of the world are not considered aliens.

11. Most people see speedy travel, mass communications and quick dissemination of information through the Internet as benefits of globalization.

12. Labor can move from country to country to market their skills. True, but this can cause problems with the existing labor and downward pressure on wages.

13. Sharing technology with developing nations will help them progress. True for small countries but stealing our technologies and IP have become a big problem with our larger competitors like China.

14. Transnational companies investing in installing plants in other countries provide employment for the people in those countries often getting them out of poverty.

Regional Integration:

Below are some of the factors pushing for regionalism.

• The general complaint about globalization is that it has made the rich richer while making the non-rich poorer. “It is wonderful for managers, owners and investors, but hell on workers and nature.”

• Globalization is supposed to be about free trade where all barriers are eliminated but there are still many barriers. For instance161 countries have value added taxes (VATs) on imports which are as high as 21.6% in Europe. The U.S. does not have VAT.

• The biggest problem for developed countries is that jobs are lost and transferred to lower cost countries.” According to conservative estimates by Robert Scott of the Economic Policy Institute, granting China most favored nation status drained away 3.2 million jobs, including 2.4 million manufacturing jobs. He pegs the net losses due to our trade deficit with Japan ($78.3 billion in 2013) at 896,000 jobs, as well as an additional 682,900 jobs from the Mexico –U.S. trade-deficit run-up from 1994 through 2010.”

• Workers in developed countries like the US face pay-cut demands from employers who threaten to export jobs. This has created a culture of fear for many middle class workers who have little leverage in this global game

• Large multi-national corporations have the ability to exploit tax havens in other countries to avoid paying taxes.

• Multinational corporations are accused of social injustice, unfair working conditions (including slave labor wages, living and working conditions), as well as lack of concern for environment, mismanagement of natural resources, and ecological damage.

• Multinational corporations, which were previously restricted to commercial activities, are increasingly influencing political decisions. Many think there is a threat of corporations ruling the world because they are gaining power, due to globalization.

• Building products overseas in countries like China puts our technologies at risk of being copied or stolen, which is in fact happening rapidly

• The anti-globalists also claim that globalization is not working for the majority of the world. “During the most recent period of rapid growth in global trade and investment, 1960 to 1998, inequality worsened both internationally and within countries. The UN Development Program reports that the richest 20 percent of the world's population consume 86 percent of the world's resources while the poorest 80 percent consume just 14 percent. “

• Some experts think that globalization is also leading to the incursion of communicable diseases. Deadly diseases like HIV/AIDS are being spread by travelers to the remotest corners of the globe.

• Globalization has led to exploitation of labor. Prisoners and child workers are used to work in inhumane conditions. Safety standards are ignored to produce cheap goods. There is also an increase in human trafficking.

• Social welfare schemes or “safety nets” are under great pressure in developed countries because of deficits, job losses, and other economic ramifications of globalization.

Advantages of Regional Economic Cooperation:

Regional integration helps countries overcome divisions that impede the flow of goods, services, capital, people and ideas. These divisions are a constraint to economic growth, especially in developing countries. The World Bank Group helps its client countries to promote regional integration through common physical and institutional infrastructure.

Divisions between countries created by geography, poor infrastructure and inefficient policies are an impediment to economic growth. Regional integration allows countries to overcome these costly divisions integrating goods, services and factors’ markets, thus facilitating the flow of trade, capital, energy, people and ideas.

Regional integration can be promoted through common physical and institutional infrastructure. Specifically, regional integration requires cooperation between countries in:

• Trade, investment and domestic regulation;
• Transport, ICT and energy infrastructure;
• Macroeconomic and financial policy;
• The provision of other common public goods (e.g. shared natural resources, security, education).

Cooperation in these areas has taken different institutional forms, with different levels of policy commitments and shared sovereignty, and has had different priorities in different world regions.

Regional integration can lead to substantial economic gains. Regional integration allows countries to:

• Improve market efficiency;
• Share the costs of public goods or large infrastructure projects;
• Decide policy cooperatively and have an anchor to reform;
• Have a building block for global integration;
• Reap other non-economic benefits, such as peace and security.

However, there are risks to regional integration that need to be identified and managed.

• Countries may have different preferences on priorities for regional integration, depending on their connectivity gaps, economic geography, or preferences for sovereignty in specific areas.
• Regional integration’s impact on trade and investment flows, allocation of economic activity, growth, income distribution are often difficult to assess.
• Lack of adequate complementary policies and institutions may lead to inefficient outcomes. For instance, policy barriers at the border may offset the gains transport infrastructure cooperation.
• Regional integration creates winners and losers, notably within countries. Policies and institutions are needed to ensure that regionalism is inclusive and social, environmental, governance risks are managed.