Levels of economic agglomeration and its benefits

Levels of economic agglomeration and its benefits
Prof. Dr. Moustafa El-Abdallah Al Kafry
The degrees of economic bloc begin gradually from the lifting of tariff and non-tariff barriers to national goods of member states,´-or-what is known as the free trade area. Then the transition to the stage of the customs -union- when the member states agree to establish a unified tariff on their imports from countries outside the bloc, and the next stage is the common market in which the flow of capital and labor is liberalized among member states, followed by the stage of economic unity in which monetary fiscal policies are coordinated, including the unification of the monetary currency and the monetary authority, finally comes the stage of full economic integration, and each of these stages requires overcoming the stage that was before it.
Level of economic agglomeration:
The first level of the economic bloc begins with partial preference, which refers to a set of measures taken by two countries to ease restrictions on the exchange of products between them, such as certain countries agreeing to abolish the quota system to which trade between them is subject, while maintaining tariffs,´-or-certain countries agree to give each other mutual customs privileges.
The second level of the economic bloc Free Trade Area: An agreement between two´-or-more countries under which foreign trade is liberalized and customs duties imposed on trade between them are eliminated, with each country retaining its freedom to impose restrictions´-or-tariffs in its trade relations with the rest of the world (non-members of the free trade area agreement). The free trade area is one of the levels of economic cooperation and a prominent example of a free trade area is the European Free Trade Area.
Third level of the economic bloc Customs -union-: An agreement between two countries´-or-a group of countries on the abolition of customs duties on goods exchanged between the countries of the agreement. This means that the member states of the Customs -union- liberalize foreign trade, remove customs restrictions on trade between them, and apply a common customs tariff on goods imported into the -union- from non--union- countries.
Advantages of the Customs -union-:
The Customs -union- is one of the forms of economic cooperation and helps to:
Expanding the market area for goods and products of the Member States of the -union-.
The division of labor among the member states of the -union-, so that each country is allocated in the production of goods that have a comparative advantage in their production.
The Customs -union- shall facilitate trade between member states and not create obstacles to the trade of non-member states. The Customs -union- requires agreement on a common customs schedule applicable to goods of non-member States. Is this unified table reached so that the trade of others is not harmed? These two things are often difficult to reconcile due to the large difference in tariffs between countries. The standardization of scales necessarily presupposes reliance on the national scales prevailing before the establishment of the -union- and then a specialized committee determines the average tariff, the average is the common scale, and this determination results from economic and financial studies and from the reconciliation of conflicting interests.
Fourth level of the economic bloc Common Market: An agreement between two countries´-or-a group of countries through which restrictions on the movement of elements of production, such as labor and capital, and the movement of products and goods between the market countries, are eliminated, thus establishing the member states of the agreement as a single market in which goods, people and capital are freely moved. It is one of the high levels of economic cooperation. A notable example of a single market is the European Common Market.
Level V Economic -union- Economic -union-: An agreement between two countries´-or-a group of countries in which economic cooperation measures, together with the advantages of the common market among the member states of the agreement, extend to the coordination of economic, financial, monetary, social policies, labor and tax legislation.
Economic integration is the highest stage of economic cooperation, as it includes, in addition to what was stipulated in the Agreement on the Economic -union- and the Common Market in the previous stages, the unification of all economic policies, the creation of a higher regional authority and an administrative body responsible for the implementation of these policies. At this stage of economic cooperation, each member State agrees to reduce its own executive powers and subordinate them in many areas to the highest regional authority, which means reaching full economic integration.
Benefits of economic agglomeration:
Economic bloc has many benefits, the most important of which are:
1 - Increasing the production capacity of the countries of the bloc.
2- Opening wider and larger markets leads to:
• Increase competitiveness,
• Incite producers to increase productivity,
• Inciting producers to improve the quality of production.
3 - Encouraging and increasing investment.
4 - Increasing investor interest in the bloc countries.
5 - Achieve economies of scale.
As for the Arab countries, the benefits of the economic bloc are greater, as the socio-economic benefits mentioned above can be achieved, and other benefits such as achieving economic and political stability, and the economic bloc can be a way to achieve the desired Arab unity.
Prof. Dr. Moustafa El-Abdallah Al Kafry
Faculty of Economics - Damascus University

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