Question

Define regional economic integration. Identify and explain the first four levels of economic integration.

Answer 1

Regional Economic Integration implies the efforts to promote free and fair trade between regions. It is the cooperation between nations to develop the specified area. The most basic form of economic cooperation is free trade area. The member countries eliminate all the barriers themselves to promote trade within economic area. The other names of regional economic integration are regional trade block, regional groupings and regional trade forces. It is the collective effort to take advantage of the accessible market and resources of the area under it.

Following are few trade blocks:

European Union (EU)

South Asian Association for Regional Cooperation (SAARC)

North American Free Trade Agreement (NAFTA)

First four levels of economic integration are as follows

1. Free Trade Area (FTA): It implies that all the member countries make the region free from trade related barriers. This in turn helps the members to exchange the goods and services into wider accessible market.

2. Common Market: this implies removal of trade barriers and free flow of labour and capital between countries. The member countries follow common trade policy within the economic region. The working population need not to have a visa or a work permit to move in this trade block.

3. Customs Union: this promotes economic cooperation as in a free trade area. Trade barriers are eliminated so that members agree to treat trade with non member countries in a similar manner.

4. Economic Union: this is the type which is created when countries enter into an economic agreement to remove trade related barriers. All the member countries follow a common economic policy within the region.