Levels of Regional Economic Integration

Regional economic integration notes

Regional economic integration (REI):

Regional economic integration is a process, in which states enter into a regional agreement in order to enhance regional cooperation through regional institutions and rules. In other words, it is an agreement among countries in a geographic region to reduce and ultimately remove, tariff and non-tariff barriers to the free flow of goods or services and factors of production among each other.

A regional trading bloc is a group of countries within a geographical region that protect themselves from imports from non-members in other geographical regions, and who took to trade more with each other.

Levels of regional economic integration are:

1. Free trade area:- it occurs when a group of countries agrees to eliminate tariffs between themselves, but maintain their own external tariff on imports from the rest of the world.

For Example:- North American Free trade area.

2. Custom union:- A custom union involves the removal of tariff barriers between members, together with the acceptance of a common external tariff against a non-member.

For Example:- European union

3. Common market:- it establishes free trade in goods and services, sets common external tariff among members and also allows for the free mobility of capital and labour across countries.

For example:- East African Common Market

4. Economic union:- The participant countries have both common policies on product regulation, freedom of movement of goods, services and the factors of production (capital and labour) and common external trade policy. And involves a single economic market, a common trade policy, a single currency, and common monetary policy.

For example:- Gulf Cooperation Council (GCC)

5. Political union:- the political union means establishment of a common parliament and other political institution. The member country share a common decision making and judicial body and there is complete unity between member nation

For example: United States of America which includes thirteen separate colonies operating under article of confederation.