• Western Governors University

• FVC 1  Global Business

C3 - REGIONAL ECONOMIC INTEGRATION
What is Regional Economic Integration?
Regional integration = steps taken by member states of a union
to increase their global competitiveness – increase in supply
capacity through regional production networks
Reasons for economic integration: social, economic, security,
political.
Different forms of economic integration:
 Free trade area - eliminating all barriers to trade such as
tariffs, quotas, and non-tariff barriers like border restrictions,
while keeping their own external tariffs (within WTO
guidelines) on members not included in the free-trade area.
 Customs union - all free trade member countries would need
to adopt a common external tariff with nonmember
countries.
 Common or single market - removal of barriers to allow free
movement of capital and labor within the customs union.
 Economic and monetary union – single regional currency
resulting from member states implementing common social
programs (education, employee benefits and retraining,
healthcare, retirement programs, etc.) and coordinated
macroeconomic policies (e.g., similar fiscal and monetary
policies).
 Political union – common defense and foreign policies.