Benefits and Drawbacks of Regional Integration

Regional Integration
Name
Institutional Affiliation
Regional Integration
Regional integration is a form of economic and political agreements where nations agree so sacrifice part of their sovereignty and share most of their economic and political policies (Bose & Bristy, 2017). Unlike trade agreements, regional integration involves extensive treaties, with the most popular example being the European Union. There are numerous benefits and drawbacks of regional integration. The main advantage of regional integration is trade gains since products and labor tend to move easily among the member nations. For instance, the NAFTA agreement between Mexico, the U.S., and Canada led to the elimination of tariffs and other trade barriers. This allowed more agricultural goods from Mexico such as meats, egg, and corn to be exported to America tax-free. Second, regional agreement lead to the expansion of economies of scale, thus allowing industries and firms to produce and sell goods in an expanded market (Bose & Bristy, 2017). For instance, since the EU adopted a shared currency (Euro), reports from the International Monetary Fund (IMF) show that the Union accounts for the 16.04% of the world's gross domestic product (GDP) (Abbott & Kenton, 2019). Countries such as Greece and Hungry, which suffer from economic turmoil tend to benefit from economically stable nations such as Germany and France.
The elimination of trade barriers leads to increased competition, which enables individual economies to develop through higher productivity, employment creation, and reduced poverty levels in another benefit of regional integration. Studies have shown that since Mexico joined NAFTA, there has been a drastic reduction in levels of poverty, increase in employment, income levels, and lower prices of foods. NAFTA eliminated trade and investment barriers and increased foreign direct investment (FDI), thus leading to employment creation (Abbott & Kenton, 2019). Certain parts of Mexico have a high standard of life that is equivalent to developed Western Europe. Other benefits of regional integration ...