Regional Integration
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Regional Integration
Over the past few decades globalization has brought tremendous benefits to the world, and an even greater reliance on others for products and services. This calls for closer international cooperation to ensure that regional integration is ever more inclusive and works for the benefit of all. There is little doubt that globalization can be a powerful engine for sustained economic growth. Regional economic integration is motivated by a desire to exploit the gains from free trade and investment. This paper will analyze the role of regional integration in promoting global business and compare and contrast economic development stages of the countries included under the North American Free Trade Agreement (NAFTA).
Role of Regional Integration
Regional economic integration is fast becoming a major factor in promoting global business. “Regional economic integration refers to agreements between countries in a geographic region to reduce, and eventually remove, tariff and non-tariff barriers to the free flow of goods, services, and factors of production between each other” (Hill, 2004). It is a process by which countries remove the barriers to free trade and the free movement of people across national borders, with the goal of reducing the tensions that can lead to international conflict (Wikipedia.org, 2006).
The World Trade Organization (WTO) reported that by early 2003, nearly all of their 145 members notified the organization of participation in one or more regional trade agreements. There are currently about 170 active agreements that have been reported to the WTO and the General Agreements on Tariffs and Trade (GATT).
World Trade Organization
The WTO and GATT are responsible for moving the world closer to a free trade regime. This is a very difficult challenge because of the different political ideas associated with the many different nations. As a result, neighboring countries develop regional trade agreements to promote free trade across their borders and within their respective regions.
Regional Integration in Action
Regional economic integration can be seen as an attempt to achieve additional gains from the free flow of trade and investments between countries beyond those set forth by organizations such as the WTO. The European Union (EU) is the most recent and perhaps the most highly evolved example of regional integration. The EU is made up of 25 democratic countries known as member states. They comprise an intergovernmental and supranational union. The Union has a common single market, consisting of a customs union, a single currency (the euro) managed by the European Central Bank, a Common Agricultural Policy, a common trade policy, a Common Fisheries Policy, and a Common Foreign and Security Policy. Passport and customs checks were abolished at most of the European Unions internal borders, creating a single space of mobility for EU citizens to live, travel, work and invest.
Advantages
Unrestricted free trade will allow countries to specialize in the production of goods and services that they can produce more efficiently. The result is a greater world production than could be achieved with trade restrictions.
Linking neighboring economies and making them increasingly dependent on each other creates incentives for political cooperation between the neighboring states and reduces the potential for violent conflict. This can also increase the regions political weight in the world.
Disadvantages
The move to regional integration involves sacrifices and losses. One or more nations may benefit from the move, but other nations may suffer as a result.
National sovereignty is also a major concern for most nations considering integration. Concerns about national sovereignty arise because close economic integration demands that countries give up some degree of their control (Hill, 2004).
Economic Development Stages
Economic development is the term generally applied to the expansion and growth of a country in terms of human development and quality of life. The goal of any country concerned about economic growth is to improve human wealth and decrease poverty. This is accomplished through sustained growth, increasing jobs and personal income, improvements in health care and the environment.
Canada and the United States
Canada and the United States benefit from a close and extensive trade relation that amounts to about $1billion a day. As a result of this trade arrangement, Canadians enjoy one of the worlds highest standards of living. Almost 80 percent of the populace works in the services and construction