ECONOMIC INTEGRATION

Kabul

Universi

ty

2015-16

GROUP MEMBERS

Ahmadullal Alizaifayz Al Bary FaieqShafiqullah AlokozaiAli Ahmad Ahmady Niaz Mohammad SahilMohammad Nazir

Content of the presentation

Introduction to Economic Integration

Advantage of Economic Integration

Disadvantage of Economic Integration

Level of Economic Integration

IntroductionA process whereby countries cooperate with one

another to reduce or eliminate barriers to the international flow of products, people or capital.

Basically there are two approaches to international trade liberalization and economic integration: the international approach and the regional approach.

The international approach involves international conferences under WTO. The purpose of these international conferences is to reduce barriers to international trade and investment.

The regional approach involves agreements among a small number of nations whose purpose is to establish free trade among themselves while maintaining barriers to trade with the rest of the world

Advantages Of Economic IntegrationTrade Creation: Member countries have

(a) wider selection of goods and services not previously

available;

(b) acquire goods and services at a lower cost after trade

barriers due to lowered tariffs or removal of tariffs .

(c) encourage more trade between member countries

the balance of money spend from cheaper goods and

services, can be used to buy more products and

services.

Employment Opportunities:

Political Cooperation:

Disadvantages Of Economic Integration  Creation Of Trading Blocs: It can also increase trade

barriers against non-member countries.

Trade Diversion: Because of trade barriers, trade is diverted from a non-member country to a member country despite the inefficiency in cost. For example, a country has to stop trading with a low cost manufacture in a non-member country and trade with a manufacturer in a member country which has a higher cost.

  National Sovereignty: Requires member countries to

give up some degree of control over key policies like trade, monetary and fiscal policies. The higher the level of integration, the greater the degree of controls that needs to be given up particularly in the case of a political union economic integration which requires nations to give up a high degree of sovereignty.

LEVELS OF ECONOMIC INTEGRATION:

i. Preferential Trade Areaii. Free Trade Areaiii. Customs Unioniv. Common Marketv. Economic Unionvi. Political Union

Preferential Trade Area:

Preferential trade agreements provide lower barriers on trade among participating nations than on trade with nonmember nations. That is, lower tariffs on imports of each other.

This is the loosest form of economic integration.

A good example is the Commonwealth Preference System , which was established in 1932 among 48 Common wealth countries of the British empire.

Free Trade Area(FTA)

An agreement between two or more countries to remove all trade barriers between themselves.

A free trade area occurs when a group of countries agree to eliminate tariffs between themselves, but maintain their own external tariff on imports from the rest of the world.

Examples of FTA are: The ASEAN Free Trade Agreement(AFTA) and the North American Free Trade Areas(NAFTA).

Examples of FTA

Customs UnionAn agreement between two or more countries to

remove tariffs between themselves and set a common external tariff on imports from non-member countries

Each country determines its own barriers and maintains its own external tariffs on imports against non-members.

A customs union has common policies on product regulations and movement of factors of productions in goods, services, capital and labor amongst members

An example of a customs union is the established customs union between the European Union and Turkey, which came into effect in 1996.

Customs Union EXMPLE

Common Market:

An agreement between two or more countries to remove all barriers to trade and allow free mobility of capital and labor across member countries.

Harmonize trade policies by having common external tariffs against non-members.

Example is the European Union (EU) previously known as European Economic Community(EEC)

Economic UnionAn agreement between two or more countries to

remove barriers to trade, allow free flow of labor and capital and coordinate economic policies.

Sets trade policies through common external tariffs on non-members.

Integration is more intense in an economic union compared to a common market, as member countries are required to harmonize their tax, monetary, and fiscal policies and to create a common currency

Example is the European Union(EU) where economic and monetary integration has created a single market with a common euro currency

Political Union:An agreement between two or more countries to

coordinate their economic monetary and political systems.

Required to accept a common stance on economic and political policies against non-members.

Example is US where each US state has its own government that sets policies and laws. But each state grant control to the federal government over foreign policies, agricultural policies, welfare policies and monetary policies. Goods, services, labor and capital can all move freely without any restrictions among the US states and the government sets a common external trade policy

The European Union in brief The European Union (EU) is an economic and

political union. It is a unique economic and political

partnership between 28 European countries.It has delivered half a century of peace,

stability, and prosperity, helped raise living standards, launched a single European currency, and is progressively building a single Europe-wide market in which people, goods, services, and capital move among Member States as freely as within one country

Why the European Union The EU’s mission in the 21st century is to: maintain and build on the peace established

between its member states; bring European countries together in

practical cooperation; ensure that European citizens can live in

security;promote economic and social solidarity; preserve European identity and diversity in a

globalized world; promulgate the values that Europeans share.

GOVERNANCEThe European Union has seven institutions: 1. the European Parliament,2. the Council of the European Union,3. the European Commission, 4. the European Council, 5. the European Central Bank, 6. the Court of Justice of the European

Union7. European Court of Auditors

Founders:France, Belgium, Luxembourg, Italy, Nether lands, Germany

THANKSSS FOR ATTENTION

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