1. International Economic integration (Cooperation)

2. International Economic integration: A decision or process whereby two or more countries combine into a larger economic region by removing discontinuities and discriminations existing along national frontiers, and by establishing certain elements of co-operation and co-ordinations between them. D. Salvatore, in his book International Economics (1990) defines international economic integration as “the commercial policy of discriminatively reducing or eliminating trade barriers only among the nations joining together. International Economic integration, therefore, aims at free movement (without any trade barriers) of goods and factors of production between member nations belonging to such economic integration. In fact, at a higher level, it may even lead to a single currency, a common market & common set of economic policies.

3. Some examples of International Economic integrations: - European Union (EU) - North American Free Trade Area (NAFTA) - European Free Trade Association (EFTA) - Latin American Free Trade Association (LAFTA) - South Asian Association for Regional Cooperation (SAARC) - Association of South East Asian Nations (ASEAN) Types (Levels) of International Economic Integration (Cooperation): 1. Preferential Trading system 2. Free Trade Area 3. Customs Union 4. Common Market 5. Economic Union

4. 1. Preferential Trading system: It was the earliest form of economic integration among 48 Commonwealth countries of the British empire established in It aimed at giving preferential treatment to the member nations by reducing tariffs on imports from each other but retaining higher tariffs on imports from outside the Commonwealth Preferential System. This was a loose form of economic integration which ended after the formation of GATT. 2. Free Trade Area: a form of international economic integration wherein the member countries remove tariffs and other trade barriers among themselves, but each member retains its own tariff, trade restrictions and commercial policies with non-member countries. Measures are also taken to prevent imports from outside the area via country with lowest external tariff. For example, EFTA, NAFTA, and LAFTA - superseded by Latin American Integration Association (LAIA) in 1980.

5. 3. Customs Union: In a customs union, the participating countries adopt a common external tariff and commercial policy on imports from outside world, and abolish all tariffs and trade barriers among themselves. Thus, in a customs union, all members act as a unit in their trade relations with non-member countries. The European Union is a customs union. The ‘Free Trade Area’ and ‘Customs Union’ are similar in that there is a tariff-free movement of goods among members. But they differ in that while a free a free trade area permits each member to retain its own tariff against non-members, the customs union adopts a common external tariff against them.

6. 4. Common Market: It is a unified single market area among nations in which there is free movement of goods, services and factors of production. In fact, a common market carries further the principle of customs union by allowing free movement of labour and capital along with goods among member countries. The European Union, and Mercosur are common markets Economic Union: It is the highest form of economic integration among nations. Besides the integration of product and factor markets as in the common market, it involves adoption of a single common currency, harmonization of monetary, fiscal, and other policies. Thus there is a significant degree of coordination among members of an economic union in adoption of a common external tariff / policy, as well a common set of domestic economic policies. E.g: Benelux, the EU (ultimate aim is formation of an eco. union).