1. Regional Economic Integration Chapter 8
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2. Levels of Economic Integration
Level of Integration
Political Union
Economic Union
NAFTA
Common Market
Customs Union
Free Trade Area
Figure 8.1 in text
EU 1992
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8-1

3. Economic Case for Regional Integration
Stimulates economic growth in countries
Countries specialize in those goods and services efficiently produced.
Additional gains from free trade beyond international agreements such as GATT and WTO.
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4. Political Case for Economic Integration
Economic interdependence creates incentives for political cooperation and reduces potential for violent confrontation.
Together, the countries have the economic clout to enhance trade with other countries or trading blocs.
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5. Impediments to Regional Integration
Groups within countries may be hurt.
Potential loss of sovereignty and control over domestic issues.
Debate:
Integration is trade creation?
Integration is trade diversion?
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6. Political World Map
8-5
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7. Regional Economic Integration
Agreements among countries in a geographic region to reduce, and ultimately remove, tariff and nontariff barriers to the free flow of goods, services and factors of production among each other.
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8. Growth of Regional Arrangements
8-7
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9. 8-8
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10. Map 8.1
8-9
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11. European Union GDP
8-10
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12. European Union and the US (April, 1998)
8-11
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13. US Top European Trading Partners
$ Billions
8-12
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14. Annual Real GDP Growth Rates
EU and US
Annual Real GDP Growth Rates %
8-13
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15. EU and US
Unemployment %
8-14
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16. EU and US
Inflation %
8-15
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17. 630 directly elected members
EU Governance
European Council
European Commission
20 Commissioners
appointed by
members for
4 year terms
Heads of State
and
Commission
President
Proposing,
implementing,
monitoring legislation.
Resolves policy issues
Sets policy direction.
Council of Ministers 1
representative
from each
member
Ultimate controlling authority. No EU laws w/o approval.
European Parliament
Court of Justice
630 directly elected members
Propose amendments to legislation, veto power over budget and single-market legislation, appoint commissioners.
1 judge from each country
Hears appeals of EU Laws.
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18. Map 8.2
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19. North American Free Trade Agreement
Became law: January 1,1994
Over 15 year period:
tariffs reduced (99% of goods traded)
NTBs reduced
investment opportunities increased
Protects intellectual property
Applies national environmental standards
Special treatment for many industries
8-18
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20. NAFTA and Mexico Maquiladora Millions of Workers 8-19
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21. Employment in Foreign-Operated Factories in Mexico
8-20
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22. Canadian Workers Move South Thanks to NAFTA
Thousands
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23. Andean PACT
Map 8.2
8-22
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24. ANCOM: Andean Pact Bolivia, Colombia, Ecuador, Peru, Venezuela
Cartagana Agreement, One of oldest still in existence
Population: 97 mm (14% of hemisphere)
GNP: $122.6 billion
Changed from FTA to customs union in 1992
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25. US Trade With The Andean Community
$ Billions
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26. Mercosur
Map 8.2
8-25
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27. The Mercosur Accord 1988: Argentina, Brazil. 1990: Paraguay, Uruguay
1995: Agreed to move toward a full customs union.
Population: 209 mm (27% of hemisphere)
GNP: $656.6 billion (8% of hemisphere)
Trade doubled in first 3 years
8-26
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28. US Trade With Mercosur 8-27 $ Billions
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29. Other Hemisphere Associations
Central American Common Market
CARICOM
Free Trade Area of the Americas
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30. ASEAN
8-29
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31. Association of Southeast Asian Nations
Created in 1967
400 million citizens
Economic, political and social cooperation
Brunei, Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam.
8-30
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32. Association of Southeast Asian Nations
8-31
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33. Net Flows of Private Capital to Indonesia, Malaysia, Philippines, South Korea and Thailand
Thru April 30.
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34. Asian Trade Flows 8-33 Destination of Exports Source of Imports %
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35. Map 8.3
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36. Asia Pacific Economic Cooperation
Founded in 1989 to ‘promote open trade and practical economic cooperation’. ‘Promote a sense of community’.
18 members
GDP: $13 trillion (1995)
50% of total world income
40% of global trade
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