8.1: Levels of Economic Integration Flashcards
What is 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 between each other.”
Figure 8.1: Levels of Economic Intigration
What are the different levels of economic integration, from least integrated to most integrated, in regional economic agreements?
The different levels of economic integration, from least integrated to most integrated, in regional economic agreements are as follows:
Free Trade Area: Removes all barriers to the trade of goods and services among member countries while allowing each country to determine its own trade policies with regard to nonmembers.
Customs Union: Eliminates trade barriers between member countries and adopts a common external trade policy, requiring administrative machinery to oversee trade relations with nonmembers.
Common Market: Has no barriers to trade among member countries, includes a common external trade policy, and allows factors of production (labor and capital) to move freely among members, necessitating cooperation on fiscal, monetary, and employment policies.
Economic Union: Goes beyond a common market by harmonizing economic policies even further, often including a common currency and coordination of fiscal and monetary policies.
Full Political Union: Represents the highest level of integration, involving not only economic but also political integration, where member countries surrender some degree of sovereignty to a central authority.
What characterizes an economic union in the context of regional economic integration agreements?
An economic union in the context of regional economic integration agreements is characterized by the following features:
Free Flow of Products and Factors: Member countries in an economic union allow the free flow of goods and services (products) as well as factors of production (such as labor and capital) among themselves.
Common External Trade Policy: Member countries adopt a common external trade policy, which means they have a unified approach to trade with nonmember countries.
Common Currency: An economic union requires the adoption of a common currency among member countries, which is used for transactions and as a unit of account.
Harmonization of Tax Rates: Member countries harmonize their tax rates to create a uniform tax environment within the union.
Common Monetary and Fiscal Policy: Economic union members coordinate their monetary and fiscal policies to ensure economic stability and compatibility.
Coordinating Bureaucracy: To manage the high degree of integration, an economic union requires a coordinating bureaucracy that oversees and enforces the agreed-upon policies.
Sacrifice of National Sovereignty: Member countries often need to surrender significant amounts of national sovereignty to the coordinating bureaucracy to achieve this level of integration.
What is the purpose of a political union in the context of an economic union?
The purpose of a political union in the context of an economic union is to create a central political apparatus that coordinates the economic, social, and foreign policies of the member states, ensuring accountability to the citizens.
How does the European Union (EU) demonstrate a move toward political union?
The EU demonstrates a move toward political union through the establishment of the European Parliament, which is directly elected by citizens of the EU countries, and the Council of Ministers, which is the EU’s controlling decision-making body composed of government ministers from each EU member state.
What is the role of the Council of Ministers in the EU?
The Council of Ministers is the controlling, decision-making body of the EU, and it is composed of government ministers from each EU member state.
