Economic integration

The basic objectives of Economic integration are reducing the cost of development by reducing import costs and optimize resources, improve the investment climate and expanding market and consolidate facilities and incentives and exemptions for investment (F D I). And coordination of economic policies to face the problems and economic crises.
Research problem:
Later a number of experiences of economic integration in the world, such as the European --union-- and the North American and Asian pole and BRIGS, substantial changes in the strong economic and commercial sites in the world.
Research hypotheses:
Economic integration promote development in Developing Countries especially the Arab Countries.
Economic integration helps to face the challenges of globalization and economic openness and correct the imbalances in Member States.
Research Aim:
The basic objective is to define the concept and stages of economic integration, its Forms´-or-Levels, its objectives, with reference to some experiences of world economic integration.
Research Plan:
Contents
Research problem: 1
Research Aim: 1
Research Plan: 1
Free-Trade Area (FTA): 5
North American Free Trade Agreement (NAFTA): 6
Association of Southeast Asian Nations (ASEAN): 6
The Common Market for Eastern and Southern Africa: 7
Customs --union--: 7
Common Market: 8
Economic --union--: 9
Economic community´-or---union--: 10
European --union-- (EU): 10
Currency --union--: 10



Economic Integration
(Research Summary)
Economic Integration is a set of arrangements aimed to enhancing the status of economic integration among a group of countries through liberalization of trade among themselves and coordinate fiscal and monetary policies, and to achieve a kind of protection for national products, also aims to reduce the cost of development by reducing import costs and achieve optimum utilization of available resources, and improve the investment climate widening the circle of market consolidation´-or-convergence of facilities and incentives and exemptions for investment. And coordination of economic policies to address the economic problems and crises.
There are several levels of Economic Integration: A preferential trade area (PTA), A free trade area (FTA), A customs --union-- (CU), A common market (CM), An economic --union-- (EU).
Economic Integration aimed reducing the cost of development by reducing import costs and achieve optimum utilization of available resources, and improve the investment climate and expand the circle of market consolidation´-or-convergence of facilities and incentives and exemptions for investment. And coordination of economic policies to address the economic problems and crises.
This research is in discussion of economic integration with a focus on the following aspects:
• The concept of economic integration.
• Stages and forms of economic integration.
• Characteristics of economic integration.
• Some experience of economic integration in the world.
Key words: economic integration, free trade area, Customs --union--, common market, economic --union--, Monetary --union--.



التكامل الاقتصادي
(Summary of the research in Arabic)
(ملخص باللغة العربية)
هدف التكامل الاقتصادي إلى تخفيض تكلفة التنمية عبر تخفيض تكاليف الاستيراد وتحقيق الاستغلال الأمثل للموارد المتاحة، وتحسين المناخ الاستثماري وتوسيع دائرة السوق وتوحيد أو تقارب التسهيلات والحوافز والإعفاءات الخاصة بالاستثمار. وتنسيق السياسات الاقتصادية لمواجهة المشكلات والأزمات الاقتصادية.
مشكلة البحث
أحدث ظهور عدد من تجارب التكامل الاقتصادي في العالم، مثل الاتحاد الأوربي والمجال الأمريكي الشمالي والقطب الأسيوي ومجموعة دول البريكس، تغييرات جوهرية في مواقع القوى الاقتصادية والتجارية في العالم.
فرضيات البحث
التكامل الاقتصادي يدفع الدول النامية وخاصة الدول العربية إلى تعزيز مسيرتها التنموية.
يساعد التكامل الاقتصادي على مواجهة تحديات العولمة والانفتاح الاقتصادي وتصحيح الاختلالات وتقويم المسيرة التنموية في الدول الأعضاء.
هدف البحث
الهدف الأساسي هو تحديد مفهوم التكامل الاقتصادي مراحله أو أشكاله، أهدافه، مع الإشارة إلى بعض تجارب التكامل الاقتصادي في العالم وأثرها في مسيرة التنمية.
خطة البحث: يتم في هذا البحث مناقشة موضوع التكامل الاقتصادي مع التركيز على الجوانب التالية:
• مفهوم التكامل الاقتصادي.
• مراحل وأشكال التكامل الاقتصادي.
• خصائص التكتلات الاقتصادية.
• بعض تجارب التكامل الاقتصادي في العالم.
كلمات مفتاحية: التكامل الاقتصادي، منطقة التجارة الحرة، الاتحاد الجمركي، السوق المشتركة، الاتحاد الاقتصادي، الاتحاد النقدي.

Economic Integration
By Prof. Dr Moustafa El-Abdallah Alkafry
Economic integration, process in which two´-or-more countries in a broadly defined geographic area reduce a range of trade barriers to advance´-or-protect a set of economic goals.
Definition of Economic integration: The elimination of tariff and nontariff barriers to the flow of goods, services, and factors of production between a different country,´-or-different parts of the same nation.
Economic integration is the unification of economic policies between different countries through the partial´-or-full abolition of tariff and non-tariff restrictions on trade taking place among them prior to their integration. This is meant in turn to lead to lower prices for distributors and consumers with the goal of increasing the combined economic productivity of the states.
There are economic and well as political reasons why countries pursue economic integration. The economic rationale for the increase of trade between member countries of economic --union--s that it is meant to lead to higher productivity.
The level of integration involved in an economic regionalist project can vary enormously from loose association to a sophisticated, deeply integrated, trans nationalized economic space. It is in its political dimension that economic integration differs from the broader idea of regionalism in general. Although economic decisions go --dir--ectly to the intrinsically political question of resource allocation, an economic region can be deployed as a technocratic tool by the participating government to advance a clearly defined and-limit-ed economic agenda without requiring more than minimal political alignment´-or-erosion of formal state sovereignty. The unifying factor in the different forms of economic regionalism is thus the desire by the participating countries to use a wider, trans nationalized sense of space to advance national economic interests.
Forms´-or-Levels of economic integration: Other forms of economic integration include common markets, economic --union--s, and federations. Common markets allow free passage of labour, capital, and other productive resources by reducing´-or-eliminating internal tariffs on goods and by creating a common set of external tariffs. Economic --union--s closely coordinate the national economic policies of their member countries.
There are four additive Forms´-or-levels of economic integration:
• Free-Trade Area
• Customs --union--
• Common Market
• Economic --union--
Free-Trade Area (FTA):
A free-trade area, the most basic type of economic integration is a simple free-trade area. In this form, attention is focused almost exclusively on a reduction of the tariffs and quotas that restrict trade. Emphasis is placed almost entirely on increasing the exchange of goods. The articulation of trans nationalized production chains, trade in services, labour mobility, and more-sophisticated forms of economic integration are not an explicit goal and emerge as merely tangential to the primary goal of securing access to foreign markets for domestic firms.
A free-trade area is a trade bloc whose member countries have signed a free-trade agreement (FTA), which eliminates tariffs, import quotas, and preferences on most (if not all) goods and services traded between them. If people are also free to move between the countries, in addition to FTA, it would also be considered an open border. It can be considered the second stage of economic integration. Countries choose this kind of economic integration if their economic structures are complementary. If their economic structures are competitive, it is likely there will be no incentive for a FTA,´-or-only selected areas of goods and services will be covered to fulfill the economic interests between the two signatories of FTA.
A "free trade area" (FTA) is formed when at least two states partially´-or-fully abolish custom tariffs on their inner border. To exclude regional exploitation of zero tariffs within the FTA there is a rule of certificate of origin for the goods originating from the territory of a member state of an FTA
Free-Trade Area. Tariffs (a tax imposed on imported goods) between member countries are abolished´-or-significantly reduced. Each member country keeps its own tariffs in regard to third countries. The general goal is to develop economies of scale and comparative advantages, which promotes economic efficiency.
Multilateral free trade agreement. Concerns a wide range of countries that have established free trade agreements involving several partners. The most salient are NAFTA and ASEAN.
North American Free Trade Agreement (NAFTA):
North American Free Trade Agreement (NAFTA), trade pact signed in 1992 that would gradually eliminate most tariffs and other trade barriers on products and services passing between the United States, Canada, and Mexico. The pact would effectively create a free-trade bloc among the three largest countries of North America. NAFTA was inspired by the success of the European Community in eliminating tariffs in order to stimulate trade among its members. A Canadian-U.S. free-trade agreement was concluded in 1988, and NAFTA basically extended this agreement’s provisions to Mexico.
NAFTA Member Nations: Canada (1989), United States (1989), Mexico (1994).
Association of Southeast Asian Nations (ASEAN):
ASEAN, in full Association of Southeast Asian Nations, international organization established by the governments of Indonesia, Malaysia, the Philippines, Singapore, and Thailand in 1967 to accelerate economic growth, social progress, and cultural development and to promote peace and security in Southeast Asia. Brunei joined in 1984, followed by Vietnam in 1995, Laos and Myanmar (Burma) in 1997, and Cambodia in 1999. The ASEAN region has a population of approximately 500 million and covers a total area of 1.7 million square miles (4.5 million square km).
The Common Market for Eastern and Southern Africa:
The Common Market for Eastern and Southern Africa is a free trade area with twenty-member states stretching from Libya to Zimbabwe. COMESA was formed in December 1994, replacing a Preferential Trade Area which had existed since 1981. Nine of the member states formed a free trade area in 2000 (Djibouti, Egypt, Kenya, Madagascar, Malawi, Mauritius, Sudan, Zambia and Zimbabwe), with Rwanda and Burundi joining the FTA in 2004 and the Comoros and Libya in 2006. COMESA is one of the pillars of the African Economic Community. In 2008, COMESA agreed to an expanded free-trade zone including members of two other African trade blocs, the East African community (EAC) and the Southern Africa Development Community (SADC). COMESA is also considering a common visa scheme to boost tourism.
Customs --union--:
A customs --union-- is a type of trade bloc which is composed of a free trade area with a Common external tariff. The participant countries set up common external trade policy, but in some cases, they use different import quotas. Common competition policy is also helpful to avoid competition deficiency.
Purposes for establishing a customs --union-- normally include increasing economic efficiency and establishing closer political and cultural ties between the member countries.
Custom --union--. Sets common external tariffs among member countries, implying that the same tariffs are applied to third countries. Custom --union--s are particularly useful to level the competitiveness playing field and address the problem of re-exports (using preferential tariffs in one country to enter another country).
As national production structures trans nationalize across the regional space, the next stage is to deepen regulatory harmonization to present a common stance to the extra-regional market. The result is the formation of a customs --union-- relying upon a common external tariff. One of the key attractions of this regulatory convergence between participating economies is that it reduces the challenges of monitoring and taxing external inputs that are used to produce goods and services that circulate within the region. Implicit in the adoption of a common external tariff is a further harmonization of national rules and regulations, particularly those relating to the control and flow of external trade into the regional economic space.
Common Market:
The idea of a common market grows from the possibilities presented by the adoption of a common external tariff. As trade flows increase and factor inputs imported into the integrating economies begin to circulate freely, production chains crossing the intra-regional national boundaries begin to form. This results in sustained pressure to reduce the costs of transporting finished and semi-finished goods between the states participating in the integration project. The solution is the harmonization of border procedures, which in its ultimate form leads to the virtual elimination of national boundaries as internal barriers to trade and the formation of a free-flowing regional economic space. A concomitant change with this complete opening of internal trade is a liberalization of labour mobility, allowing the inhabitants of one-member state to work in all the other member states of the region.
A common market is a first stage towards a single market, and may be-limit-ed initially to a free trade area with relatively free movement of capital and of services, but not so advanced in reduction of the rest of the trade barriers.
A single market is a type of trade bloc which is composed of a free trade area (for goods) with common policies on product regulation, and freedom of movement of the factors of production (capital and labour) and of enterprise and services. The goal is that the movement of capital, labour, goods, and services between the members is as easy as within them. The physical (borders), technical (standards) and fiscal (taxes) barriers among the member states are removed to the maximum extent possible. These barriers obstruct the freedom of movement of the four factors of production.
Common Market. Factors of production, such a labor and capital, are free to move within member countries, expanding scale economies and comparative advantages. Thus, a worker in a member country is able to move and work in another member country.
The European Economic Community was the first example of a both common and single market, but it was an economic --union-- since it had additionally a customs --union--.
Economic --union--:
An economic --union-- is a type of trade bloc which is composed of a common Market with a customs --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 a common external trade policy. The countries often share a common currency.
An economic --union--, A common market involving more than one nation based on a mutual agreement to permit the free movement of capital, labour, goods and services. An economic --union-- can also require the coordination of various social, fiscal and monetary policies among participating nations.
Purposes for establishing an economic --union-- normally include increasing economic efficiency and establishing closer political and cultural ties between the member countries. Economic --union-- is established through trade pact.
Economic --union--. Monetary and fiscal policies between member countries are harmonized, which implies a level of political integration. A further step concerns a monetary --union-- where a common currency is used, such as with the European --union-- (Euro).
countries are involved in economic integration with each other. When two´-or-more countries form a customs --union-- (free-trade zone), each member state keeps its own system of taxation. The aims of an economic --union-- are more ambitious, entailing far-reaching-limit-ations on the sovereignty of the member states--;--
Economic community´-or---union--:
In an economic community´-or---union--, the logic of common external tariffs, regulatory approximation, and harmonization of macroeconomic policy is taken to its full conclusion through the construction of an overarching governance framework that imposes a common economic policy system on all countries in the region. In effect, the member states surrender a significant degree of economic sovereignty to the whole in the expectation of significantly expanded opportunities presented by a much larger, fully integrated economic space facilitating the full mobility of finished products, factors of production, and labour. The harmonization of regulations and procedures is facilitated through the creation of an overarching legislative and legal system that trumps national laws and rules and also ensures that economic actors will face the same treatment throughout the region.
European --union-- (EU):
European --union--, international organization comprising 27 European countries and governing common economic, social, and security policies. Originally confined to western Europe, the EU has expanded to include several central and eastern European countries. The EU’s members are Austria, Belgium, Bulgaria, Cyprus, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, and the United Kingdom. The EU was created by the Maastricht Treaty, which entered into force on November 1, 1993. The treaty was designed to enhance European political and economic integration.
Currency --union--:
A currency --union-- (monetary --union--), With the evolution of a common market and the concomitant surge in intra-regional trade comes a new source of expenses for business: the costs of transnational transactions. Even though borders may be open to the free transit of goods and services, the need to constantly engage in foreign exchange operations to settle payments as well as the differing relative costs caused by different national economic policies impose a constant financial and administrative expense on firms operating within the region. The solution and next stage in the integration progression is some form of monetary --union--, be it through an agreed fixing of relative exchange rates´-or-the more commonly discussed adoption of a common currency. At this point, the economic aspects of integration also begin to take on a strong political flavor. Adoption of a common currency´-or-monetary policy by all members of the project also requires a strong convergence in macroeconomic policy, which imposes external restraints on the domestic fiscal and expenditure policies that a government may pursue. The result is a gradual blurring of the political as well as economic lines that separate the states participating in the integration project.
A currency --union-- (also known as monetary --union--) is where two´-or-more states share the same currency, though without their necessarily having any further integration such as an Economic and Monetary --union--, which has, in addition, a customs --union-- and a single market. There are three types of currency --union--s:
• Informal - unilateral adoption of foreign currency
• Formal - adoption of foreign currency by virtue of bilateral´-or-multilateral agreement with the issuing authority, sometimes supplemented by issue of local currency in foreign currency peg regime
Formal with common policy - establishment by multiple countries of common monetary policy and issuing authority for their common currency
The theory of the optimal currency area addresses the question of how to determine what geographical regions should share a currency in order to maximize economic efficiency.
An "economic --union--" combines customs --union-- with a common market. A "fiscal --union--" introduces a shared fiscal and budgetary policy. In order to be successful, the more advanced integration steps are typically accompanied by unification of economic policies (tax, social welfare benefits, etc.), reductions in the rest of the trade barriers, introduction of supranational bodies, and gradual moves towards the final stage, a "political --union--".
The formation and pursuit of economic integration can also present new international challenges for participating states. Developing states engaged in a defensive regionalist project to improve their collective negotiating power with predominant states in the global political economy can be faced with a divide-and-conquer strategy in interregional and multinational negotiations. This places additional strains on the anchor state to maintain the solidity of the region. In some instances, this is not a particularly significant challenge, because the benefits of collective negotiation in international forums quickly outweigh the economic benefits offered by the group. In some respects, this reflects the EU’s quiet strategy of encouraging economic integration and regionalism as a strategy for internally driven development and enhanced political stability in developing areas.
By integrating the economies of more than one country, the short-term benefits from the use of tariffs and other trade barriers is diminished. At the same time, the more integrated the economies become, the less power the governments of the member nations have to make adjustments that would benefit themselves. In periods of economic growth, being integrated can lead to greater long-term economic benefits--;-- however, in periods of poor growth being integrated can actually make things worse.
Prof. Dr Moustafa El-Abdallah Alkafry
Faculty of Economics – Damascus University


Economic Bloc and Member Nations
Economic Bloc and Member Nations (Membership date) Population in Millions (2008) GDP in Trillion --$--US PPP (2007)
NAFTA: Canada (1989), United States (1989), Mexico (1994). 457.3 17.617
EU: Belgium (1957), France (1957), Italy (1957), Luxembourg (1957), Netherlands (1957), West Germany (1957), Denmark (1973), Ireland (1973), United Kingdom (1973), Greece (1981), Portugal (1986), Spain (1986), East Germany (1990 reunification), Sweden (1995), Finland (1995), Austria (1995), Estonia (2004), Latvia (2004), Lithuania (2004), Poland (2004), Czech Republic (2004), Slovakia (2004), Slovenia (2004), Hungary (2004), Cyprus (2004) and Malta (2004), Bulgaria (2007), Romania (2007). 502.5 15.203
Mercosur: Argentina (1991), Brazil (1991), Uruguay (1991), Paraguay (1991), Venezuela (2011). 267.4 2.895
ASEAN: Indonesia (1967), Malaysia (1967), Philippines (1967), Singapore (1967), Thailand (1967), Brunei (1984), Vietnam (1995), Laos (1997), Burma (1997), Cambodia (1999). 601 3.084
EFTA: Austria (1960-1995), Denmark (1960-1973), Iceland (1960), Norway (1960), Portugal (1960-1986), Sweden (1960-1995), Switzerland (1960), United Kingdom (1960-1973), Finland (1986-1995), Liechtenstein (1991). 12.6 0.567
Andean Community: Bolivia (1969), Chili (1969-1976), Colombia (1969), Ecuador (1969), Peru (1969), Venezuela (1973-2006). 101.1 0.903
CAFTA: Salvador (1961-1971, 1991), Guatemala (1961-1971, 1991), Nicaragua (1961-1971, 1991), Honduras (1962-1971, 1991), Costa Rica (1963-1971, 1991). 33 0.059
CARICOM: Barbados (1973), Guyana (1973), Jamaica (1973), Trinidad and Tobago (1973), Antigua and Barbuda (1974), Belize (1974), Dominica (1974), Grenada (1974), Montserrat (1974), Saint-Kitts-and-Nevis (1974), Sainte-Lucie (1974), Saint-Vincent-et-Grenadines (1974), Bahamas (1983), Suriname (1995), Haiti (2002). 15.9 0.091
BRICS: Brazil (2010), Russia (2010), India (2010), China (2010), South Africa (2011) 2,966,63 22,539

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