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Regional Economic Integration
Agreements between countries in a geographic region to reduce tariff and non-tariff barriers.
Levels of Economic Integration
Different stages of economic cooperation among countries, including Free Trade Area, Customs Union, Common Market, Economic Union, and Political Union.
Free Trade Area
Most popular form of integration, where all barriers to trade among member countries are removed.
Customs Union
Eliminates trade barriers between member countries and adopts a common external trade policy.
Common Market
No barriers to trade between member countries, a common external trade policy, and free movement of factors of production.
Economic Union
A form of integration that allows free flow of products and factors of production, includes a common currency and harmonization of policies.
Political Union
Combines independent states into a single union with a central political structure for economic, social, and foreign policy coordination.
Trade Creation
Occurs when low-cost producers within a free trade area replace high-cost domestic producers.
Trade Diversion
Occurs when higher-cost suppliers within a free trade area replace lower-cost external suppliers.
North American Free Trade Agreement (NAFTA)
A trade agreement between the U.S., Canada, and Mexico that was renegotiated to become the US-Mexico-Canada Agreement (USMCA).
European Union (EU)
A political and economic union of member states established to facilitate economic cooperation and a single market.
Euro
The common currency used by 19 of the 28 member states of the European Union, adopted under the Maastricht Treaty.
ASEAN
Association of Southeast Asian Nations, a regional intergovernmental organization comprising ten Southeast Asian countries.
MERCOSUR
A South American trade bloc with Brazil, Argentina, Paraguay, Uruguay, and Venezuela aiming for free trade and economic integration.
Maastricht Treaty
A treaty that committed EU members to adopt a single currency and enhanced political integration among its member states.
Implications for Managers
Regional economic integration creates more competitive markets and opens up previously protected markets to foreign competition.
Pros of Regional Integration
Promotes trade, reduces conflict between nations, and provides greater bargaining power in global affairs.
Cons of Regional Integration
Can lead to trade diversion, loss of sovereignty, and may not always result in better trade solutions.
