Economic benefits and costs of regional economic integration...

Economic benefits and costs of regional economic integration

As the world experience shows, the economic result of regional integration is ambiguous. Some sectors of the economy may expand, others may decline. The unification of the economies of the member countries can lead to an equalization of their incomes in such a way that this improvement can occur at the expense of others. When studying the consequences of integration, two groups of effects1 are distinguished:

1) the effect of competition and economies of scale;

2) the effect of trade and the allocation effect (placement).

The effect of competition and economies of scale (economies of scale) arise due to the fact that national markets are united in a single market. A larger market allows the companies of the united countries to get a positive return on the scale of their activities, as well as to establish competitive relations that undermine the positions of the monopolies and lead to increased efficiency. The scale effect is a decrease in the long-term cost of production as a result of the growth in the volume of output due to entry into the markets of the member countries of the integration association. Savings on production scale are especially important for small countries, since small sizes from the internal market of goods and factors of production of nc allow firms to increase production volumes

The effect of trade and the allocation effect are associated with changes in the commodity and geographical structure of trade as a result of integration. The geographical structure of trade may change due to the fact that when trade barriers are eliminated, imports from partner countries become cheaper, which facilitates the replacement of locally produced goods and imported goods from third countries with these products. There is simultaneous expansion of trade and its reorientation.

How to ...

Choose! The largest selection of informative articles.

Tired of looking for a solution?

Get Your ESSAY Now!

Expanding trade means growing international trade and economic welfare as a result of reducing or eliminating trade barriers. Expansion of trade occurs when all members of the integration group direct their efforts to the production of those goods and services in which they have comparative advantages and begin to trade more intensively with each other.

Trade reorientation is a change in the geographical structure of international trade that occurs as a result of the formation of an integration association. Eliminating or reducing trade barriers between members of integration agreements leads to increased trade between them, often at the expense of third countries. This occurs when integration into an integration grouping is accompanied by the establishment of higher trade restrictions with respect to third countries, as a result of which their imports are being squeezed out.

Western European Integration

The most successful example of regional integration over the past four decades is the EU, which unites 27 European countries. In 1951, six European countries (Belgium, Germany, Italy, Luxembourg, the Netherlands and France) signed an agreement on the establishment of the European Coal and Steel Community (ECSC), an international state organization that combines coal, metallurgy and iron ore with the aim of forming a common industry market .

The signing of the Rome Treaties, as well as the agreement on the European Economic Community (EEC) and the European Atomic Energy Community (1957), gave a new quality to the integration process. The EEC clearly recorded three goal-oriented directions: the creation of a customs union, the free movement of people, capital and services, the implementation of a common policy in agriculture, social and legislative spheres, and foreign trade. The Rome Treaty established the principle of "four freedoms", implying the free movement of capital, goods and services and labor and leading to the creation of a common market and the deepening integration of economies.

The completion of the organizational period was the transition to the European Community (1967). In 1968, a customs union was formed. Further, in order to create a zone of monetary stability in 1979, the European Monetary System (EMS) was created.

The decision on further integration and integration into the economic union was made in 1991 at the conclusion of the Maastricht Treaty. As its main task was proclaimed a movement from a single market - to an economic and monetary union. It also formulated the task of creating a monetary union and the transition to a common European currency. The euro area was formed by 1999, which currently includes 18 countries (as of 01/01/2014) - France, Germany, Italy, Belgium, the Netherlands, Latvia, Luxembourg, Ireland, Greece, Portugal, Spain, Austria, Finland, Malta, Cyprus, Slovenia, Slovakia, Estonia. Another key element has been the imparting of economic integration of the social dimension. On this basis, a general social policy was formulated. The result of the Maastricht Treaty was the establishment of a single European citizenship; political union; economic and monetary union (EMU).

Ready to make your order?

Get your great paper now

Today, the European Union is a unique intergovernmental association that ensures the optimal functioning of national economic systems in the context of unified legislation and a unified monetary policy. It has established itself as the largest center of economic power, which has concentrated large financial resources, which makes it one of the world's leading creditors.

thematic pictures

Price Plan & Our Features

$18.00 per page
Due date 14 days or longer
  • Free Outline
  • Free Formatting
  • Free Title page
  • Free Reference Page
  • Free Revisions
  • Free Submission by Chapters
  • Free Plagiarism Report
  • Free Customer Service
Additional Services
  • 1 – page abstract
  • VIP Support
  • Expedited delivery
  • Essay outline
  • $25.25
  • $12.99
  • $8.99
  • $25.25
Order Now

Also We Can Offer!

Other services that we offer

If you don’t see the necessary subject, paper type, or topic in our list of available services and examples, don’t worry! We have a number of other academic disciplines to suit the needs of anyone who visits this website looking for help.

How to ...

We made your life easier with putting together a big number of articles and guidelines on how to plan and write different types of assignments (Essay, Research Paper, Dissertation etc)