The Stages and The Advantages and Disadvantages of Regional Integration

Economic Integration
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Economic Integration
Stages
Economic integration is a process whereby countries that are close to one another geographically come together to eliminate or reduce barriers to the flow of goods, capital, or people among them. There are five stages involved in the process of economic integration. Free trade area is the first stage where tariffs and the quantitative restrictions between the member countries are removed (Johnson & Langley, 2003). However, each of the member nations is allowed to pursue individual policies against countries outside the integration. The second stage is the customs union. In this stage, the member countries eliminate tariffs and quantitative restrictions between one another but jointly determine the tariffs to be applied to countries outside the trade area. As such, this stage combines features of free trade area with common policies towards outside countries. A common market is the third stage where, apart from the elimination of duties and tariffs on products, there is there is free movement of production factors (capital and labor) between the member countries. The member countries also pursue common trade policy against nonmember countries. The fourth stage is the economic union. In this stage, there is the elimination of barriers to trade and the movement of capital and labor, common policy against outside countries, and the coordination of national economic policies of member countries. As such, member countries have to harmonize their fiscal, tax, and monetary policies. There is also the creation of a common currency and conceding of a certain amount of sovereign power to th...