What Is Regional Economic Integration? Regional economic integration - agreements between countries in a geographic region to reduce tariff and non-tariff barriers to the free flow of goods, services, and factors of production between each other Question: Do regional trade agreements promote free trade? In theory, yes, but the world may be moving toward a situation in which a number of regional trade blocks compete against each other Are you familiar with NAFTA? How about the European Union? Do you know what these agreements are and why they’re important to international companies? Both NAFTA and the European Union, or EU, are forms of regional economic integration -- agreements between countries in a geographic region to reduce tariff and nontariff barriers to the free flow of goods, services, and factors of production between each other. In other words, these agreements are designed to promote free trade, and depending on the level of integration, allow the factors of production to move freely between countries. To get a better idea of what we’re getting at here, imagine if the U.S. was actually a group of countries that had signed an agreement to become a political union. As you know, goods move freely between states as do the factors of production like labor and capital. There are no tariffs that limit California exporting oranges to Ohio for example. Similarly, you don’t have to get a permit to work in New York if you live in New Jersey. So, workers go where they can be most productive, industry goes where it can be most efficient. The idea behind regional economic integration is that without trade barriers, member countries will be better off. However, there is some concern that as more countries become involved in regional agreements, the trading blocs will begin to compete against each other. Let’s look at the different levels of economic integration, and explore some of the trading blocs that exist today.
What Is Regional Economic Integration? Regional economic integration - agreements between countries in a geographic region to reduce tariff and non-tariff barriers to the free flow of goods, services, and factors of production between each other Question: Do regional trade agreements promote free trade? In theory, yes, but the world may be moving toward a situation in which a number of regional trade blocks compete against each other Are you familiar with NAFTA? How about the European Union? Do you know what these agreements are and why they’re important to international companies? Both NAFTA and the European Union, or EU, are forms of regional economic integration -- agreements between countries in a geographic region to reduce tariff and nontariff barriers to the free flow of goods, services, and factors of production between each other. In other words, these agreements are designed to promote free trade, and depending on the level of integration, allow the factors of production to move freely between countries. To get a better idea of what we’re getting at here, imagine if the U.S. was actually a group of countries that had signed an agreement to become a political union. As you know, goods move freely between states as do the factors of production like labor and capital. There are no tariffs that limit California exporting oranges to Ohio for example. Similarly, you don’t have to get a permit to work in New York if%2...