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Types of economic integration

Economy

Specific Objectives and Competences

  • To identify the different processes of regional integration.
  • To understand the different types of regional integration that have been observed until now.

Contents

  • The European Union is not the only international organisation immersed in a process of regional integration. In other parts of the world there are similar processes. Here a few examples:
  • There are essentially two factors that define the economic integration between states:
    • Negative integration: this implies the elimination of barriers that restrict the movement of goods, services and factors of production.
    • Positive integration: this refers to the creation of a common sovereignty through the modification of existing institutions and the creation of new ones.
  • It is also important to distinguish between integration and cooperation. In the former, there is a transfer of sovereignty to a higher entity based on the proposed objectives. In the latter, it is more a case of basing commonly agreed policies on a set of specific agreements.
  • These are the main models for economic integration:
    • Free Trade Area:
      • In this case, tariff barriers to the trade of goods between member states are eliminated, but each country retains control over its own commercial policy; this means that certain types of barriers are effectively maintained.
      • There are certain limitations imposed by “rules of origin”: only goods that have either been completely produced in one of the member countries, or which have mainly been produced in them are allowed to circulate freely.
      • Examples: EFTA and NAFTA.
    • Customs Union:
      • The EU reached this objective in 1968, when it was still the EEC.
      • The Customs Union was based on the creation of a Common Customs Tariff (CCT) with respect to the rest of the world. At the same time, customs duties between its member countries were eliminated.
      • As well as goods, this type of integration also seeks to promote the trading of services.
      • As a result, the members must agree to establish a common customs legislation.
    • Single Market:
      • This implies suppressing all barriers to trade (both tariff and non-tariff barriers).
      • The single market continues to have a CCT with respect to the rest of the world.
      • The elimination of barriers to the free circulation of capital and labour within the territory of the Single Market.
      • All of this implies the coordination of certain economic policies such as transport, competition, social cohesion and taxation (VAT).
      • In the EU, this process materialised thanks to the Single European Act, which was established in 1987 and ended in 1993.
    • The Economic and Monetary Union (EMU) which became a reality in 2002 when the Euro came into circulation.
      • To the characteristics of the Single Market, it was necessary to add greater integration and coordination in a number of other areas, such as foreign policy and justice.

Debates

Based on the following article about the positive and negative effects of economic integration

Discuss whether the integration of two very different economies can be beneficial or prejudicial for the less developed country. Is it possible for a country to remain outside these policies of economic integration?

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