Disadvantages of Integration

As a result, littler and emerging economies have banded together to take returns of geographic and economic benefit that would differentwise be unavailable. This explore examines the reasons behind such organizations, and considers whether these examples of economic integration meet the goals that their participants have.

Governments argon interested in regional integration because prosperity for peerless region evict spill over into others; this is particularly certain of Europe in the 1950s and southeast Asia during the 1990s. A nonher reason that regional integration occurs is that governments can seek to lower patronage barriers between or among the countries involved. This was the reason that the European economical friendship was formed, for example. In still other cases, neighboring countries may conciliate to give each other privileged take spatial relation in order to increase trade with each other in the expectation of such a move leading(a) to increased prosperity. This approach to integration was particularly popular during the mid-sixties and 1970s (Flam, 1995, p. 460).

Economic integration can lead to noxious effects on participants' trade relations with third countries not included in the integrated group. However, Article 24 of the public Agreement on Tariffs and Trade (GATT) sets

Even when trade barriers against third countries atomic number 18 not raised, regional agreements can still cause damage to nonparticipating nations. A selective lowering of trade barriers can lead to trade distortions because when tariffs are uniform, a agricultural will import from the lowest-cost source, although a higher(prenominal) price may be paid than when trade is tout ensemble free. When tariffs on imports from somewhat countries are lower than from others, importers will deprave from the country which offers the lowest price, which may not be the country which can produce at the lowest cost. This effect, called trade diversion, is a consequence of regional trade agreements, and is offset by some unknown amount by trade creation, which is the extra trade and prosperity generated by the lowering of barriers.

Kwan, C. H.

(1992, June 18). Yen for an anchor. Far easterly Economic Review, p. 71.

Economic integration can be an useful way for nations to increase their own trade positions (as well as the positions of nonparticipating nations), but there is the risk that such integration can harm both participants and nonparticipants alike. The actual results of integration rests with the way the agreements are developed and implemented, not with the idea of integration itself.

Flam, H. (1995, April). From EEA to EU. European Economic Review, pp. 457-466.

There are many examples of regional economic integration, but four examples can serve to illustrate the ways in which economic integration has been practiced. The European Community (EC) has succeeded in reduce tariffs and customs regulations among most of its members, and is seeking to establish a ace currency for the region, although this latter idea is running into difficulty. The North American Free Trade Agreement (NAFTA), only recently ratified, eliminated many trade restrictions among Canada, the United States and Mexico, but has led to criticism from Latin America that the northern agreement will harm southernmost America
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