In: Economics
Benefits
1) Trade opportunities - The regional integration helps removes any
existing tariff and the ease in doing business helps in passage of
good. The market opens up to new source, and more opportunity to
expand their business. The regular inflow of products and more
options will ultimately help consumers with a fair price due to
competitions..
2) Economic Growth & employment - Economic integration between
two region ensures that the business cycle will be as usual between
them. In case of a slow down in economy, this constant flow will
act as balancing the trade deficit and thus contributing to the
GDP. The integration also opens up the possibility of migration of
people for job opportunity.
3) Political Co-operation - The economic ties plays a vital role in
maintaining political relation between the countries. Generally
smaller economies depend on bigger economies to fulfill their
resource and in the time of emergency. This economic assistance is
vital whenever a country needs support at global level.
Drawbacks
1) Trade Diversion & Block - These treaties are generally
signed by regions who are just opening up to global markets. This
often leads to limited opportunity as the nations outside the
treaties might not get the same preference. In a way this a
challenge to open market and can lead to monopoly of trade
block.
2) Cultural Centralization - The integration breaks down the
exclusiveness of a region. A product once known for its rarity
suddenly becomes available everywhere. The sudden availability
decreases the value and the business that were initially the only
one in the sector, has no buyer.
3) Affect to the market - A company operating in a small region
with less operating cost can move its factory to the other region
with higher operating cost due to extra tax relief and ease of
setting up.This movement helps in business saving enormous amount
due to special economic relief. However, this also put adverse
effect on market as the products become expensive due to this extra
movement and increase in operating cost of the company.