2. Regional Economic Integration8
chapter
Regional Economic Integration
McGraw-Hill/Irwin
Global Business Today, 5e
© 2008 The McGraw-Hill Companies, Inc., All Rights Reserved.

3. Chapter 8: Regional Economic Integration
INTRODUCTION
Regional economic integration refers to agreements between countries in a geographic region to reduce tariff and nontariff barriers to the free flow of goods, services, and factors of production between each other.
While regional trade agreements are designed to promote free trade, there is some concern that the world is moving toward a situation in which a number of regional trade blocks compete against each other.

4. Chapter 8: Regional Economic Integration
LEVELS OF ECONOMIC INTEGRATION
There are five levels of economic integration:
Free trade area
Customs union
Common market
Economic union
Political union

5. Chapter 8: Regional Economic Integration
THE CASE FOR REGIONAL INTEGRATION
The case for regional integration is both economic and political.
The Economic Case for Integration
The Political Case for Integration
Impediments to Integration

6. Chapter 8: Regional Economic Integration
THE CASE AGAINST REGIONAL INTEGRATION
Regional economic integration only makes sense when the amount of trade it creates exceeds the amount it diverts
Trade creation occurs when low cost producers within the free trade area replace high cost domestic producers
Trade diversion occurs when higher cost suppliers within the free trade area replace lower cost external suppliers

7. Chapter 8: Regional Economic Integration
REGIONAL ECONOMIC INTEGRATION IN EUROPE
There are two trade blocks in Europe: the European Union (EU) and the European Free Trade Association. Of the two, the EU is by far the more significant, not just in terms of membership, but also in terms of economic and political influence in the world economy.

8. Chapter 8: Regional Economic Integration
Evolution of the European Union
Political Structure of the European Union
The Single European Act
The Establishment of the Euro
Enlargement of the European Union

9. Chapter 8: Regional Economic Integration
REGIONAL ECONOMIC INTEGRATION IN THE AMERICAS
Regional economic integration is on the rise in the Americas. The North American Free Trade Agreement (NAFTA) is the most significant attempt.
Other efforts include the Andean group and MERCOSUR.
In addition, there are plans to establish a hemisphere-wide Free Trade Area of the Americas (FTAA).

10. Chapter 8: Regional Economic Integration
The North American Free Trade Agreement
The Andean Community
MERCOSUR
Central American Common Market, CAFTA and CARICOM
Free Trade Area of the Americas

11. Chapter 8: Regional Economic Integration
REGIONAL ECONOMIC INTEGRATION ELSEWHERE
Various efforts at economic integration are taking place in other parts of the world.
Association of Southeast Asian Nations
Asia Pacific Economic Cooperation
Regional Trade Blocs in Africa

12. Chapter 8: Regional Economic Integration
IMPLICATIONS FOR MANAGERS
Regional economic integration creates both opportunities and threats for managers.
Opportunities
Threats