Economic Integration
Economic integration is sometimes referred to as regional integration as it often occurs
among neighbouring nations.
Advantages of Economic Integration
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.
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.
The Costs of Economic Integration
Despite the benefits, economic integration has costs. These fall into two categories:
Diversion of trade. That is, trade can be diverted from nonmembers to members,
even if it is economically detrimental for the member state.
Erosion of national sovereignty. Members of economic unions typically are required
to adhere to rules on trade, monetary policy, and fiscal policies established by an
unelected external policymaking body.
Because economists and policymakers believe economic integration leads to significant
benefits, many institutions attempt to measure the degree of economic integration across
countries and regions. The methodology for measuring economic integration typically
involves multiple economic indicators including trade in goods and services, cross-border
capital flows, labor migration, and others. Assessing economic integration also includes
measures of institutional conformity, such as membership in trade unions and the strength of
institutions that protect consumer and investor rights.
Real-World Example of Economic Integration
The European Union (EU) was created in 1993 and included 28 member states in 2019.
Since 2002, 19 of those nations have adopted the euro as a shared currency. According to the
International Monetary Fund (IMF), the EU accounted for 16.04% of the world's gross
domestic product.
The United Kingdom voted in 2016 to leave the EU. In January 2020 British lawmakers and
the European Parliament voted to accept the United Kingdom's withdrawal. The goal was to
finalize the exit by January 2021.
Regional Trade Agreements
Regional trading agreements refer to a treaty that is signed by two or more countries to
encourage free movement of goods and services across the borders of its members. The
Economic integration is sometimes referred to as regional integration as it often occurs
among neighbouring nations.
Advantages of Economic Integration
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.
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.
The Costs of Economic Integration
Despite the benefits, economic integration has costs. These fall into two categories:
Diversion of trade. That is, trade can be diverted from nonmembers to members,
even if it is economically detrimental for the member state.
Erosion of national sovereignty. Members of economic unions typically are required
to adhere to rules on trade, monetary policy, and fiscal policies established by an
unelected external policymaking body.
Because economists and policymakers believe economic integration leads to significant
benefits, many institutions attempt to measure the degree of economic integration across
countries and regions. The methodology for measuring economic integration typically
involves multiple economic indicators including trade in goods and services, cross-border
capital flows, labor migration, and others. Assessing economic integration also includes
measures of institutional conformity, such as membership in trade unions and the strength of
institutions that protect consumer and investor rights.
Real-World Example of Economic Integration
The European Union (EU) was created in 1993 and included 28 member states in 2019.
Since 2002, 19 of those nations have adopted the euro as a shared currency. According to the
International Monetary Fund (IMF), the EU accounted for 16.04% of the world's gross
domestic product.
The United Kingdom voted in 2016 to leave the EU. In January 2020 British lawmakers and
the European Parliament voted to accept the United Kingdom's withdrawal. The goal was to
finalize the exit by January 2021.
Regional Trade Agreements
Regional trading agreements refer to a treaty that is signed by two or more countries to
encourage free movement of goods and services across the borders of its members. The
