Economic integration: The example of the European Union
- The attractiveness of the WTO remains strong
- The dispute settlement body works
- The malfunctioning of the WTO announced the end model?
- The Doha round of negotiations
- Institutional weaknesses
- The WTO does not have the means to ensure effective regulation of trade
Economic integration is a phenomenon that is contrary to one of the principles of the World Trade Organization (WTO). It tends to create some sort of a protectionist area which the WTO tolerates anyway. There are nearly 130 such areas in the world. The first major agreement was the Treaty of Rome signed in 1957. Its goal was to create a single common market. It represents the most advanced economic integration at the global level. This translates into the creation of various elements such as the free movement of goods, services and people as well as introducing a single currency and a monetary policy.
What is economic integration? There are five levels of integration: An area of free trade: countries that decide to establish a free trade which agrees to remove tariffs between member countries, but each country maintains its own customs tariff. The customs union: it is a free trade area plus a common external tariff.
The common market: It is a customs union over a free-flow of people and capital. The Economic Union: a common market that is accompanied by a harmonization of economic policies. The economic and monetary union: it is an economic union with a common monetary policy and a single currency. ASEAN: Association of South-East Asia. It was signed in 1967 by a dozen countries such as Thailand, Vietnam, Cambodia, Malaysia we will find neither China nor Japan and South Korea. This is an area of free trade.
NAFTA: free trade agreement in North America. It was signed in 1992 between the United States, Canada and Mexico.
MERCOSUR: signed in 1991 and implemented in 1995 by Argentina, Brazil, Paraguay and Uruguay: Customs Union.
The effects of regionalism (economic integration):
It includes positive and negative effects. The first effect: the diversion of traffic: it promotes trade within the economic zone to the detriment of others. Eg. three countries A, B, C. Countries B and C produce shirts, product A wishes to buy them. The cost of producing 100 shirts in country B is equal to 320 dollars. In country C, it produces 100 to 300 dollars. Country A is going to import.
If there is no free trade zone, the country wishing to import shirts will have to pay customs duty of about 20%. Country A is going to trade with the country C and will pay $360. If you create a free trade between country A and country B, the customs duties with the outside are still 20% then A will trade with B and not with C, they will pay $320 for these shirts .
Second effect: it is linked to gains made: if the tariffs are disappearing, the cost of imports will decrease and become competitive with domestic products. However, this will create new networks of exchange and this will benefit consumers who will benefit from lower priced products and more diversified products.
Third effect: regionalism can help countries prepare for further liberalization so that they can gradually open their doors against foreign competition.
Tags: free trade, euro, MERCOSUR