The economic integration refers to the process in which a group of countries gradually coordinate or merge their economic policies over time. It seeks to overcome, by common agreement, the barriers that divide the member countries to be able to jointly manage shared resources and assets.
Therefore, it is an economic collaboration between different nations, where it is agreed to reduce or eliminate trade barriers to the transnational flow of products, people or capital, in order to increase cross-border trade and investment to create a common market and thus raise the standard of living.
The purpose of this economic agreement is to expand the markets of the member countries, reducing trade barriers and other economic obstacles between nations, thus increasing trade between them. In this way, costs for manufacturers and buyers are reduced..
In recent decades, an increasing number of economies have embraced regional economic integration as a means of promoting the market opening and rule-making agenda..
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Economic integration creates more opportunities for countries to trade with each other, removing barriers to trade and investment. Due to the reduction or elimination of tariffs, integration produces better prices for consumers in member countries.
This contributes significantly to the fact that less developed countries can have relatively high growth rates..
By removing restrictions on labor movement, economic integration can help expand job opportunities.
Countries can shift production to cheaper labor markets located in member countries. Similarly, workers can move to get better jobs and wages.
Regional similarities can open the door to greater understanding and closer collaboration. Member countries may also discover that it is easier to agree, as there are fewer countries..
The nations of an economic integration can trade more with each other than with the countries that do not belong to such an agreement. This could mean having to do more with a more expensive or less efficient manufacturer, because it is in a convention country..
Therefore, the less strong companies could be protected thanks to the integration agreement. Thus, economic integration can generate new walls with countries that are outside the agreement..
Countries may find that they must renounce their own economic and political rights each time a new meeting of discussions and agreements takes place within the framework of economic integration..
For example, the economic crisis in Greece threatened not only the European Union in general, but also the rights of Greece and other member countries to determine their own internal economic policies..
This is the basic level of economic integration. It refers to a free trade agreement, formed by one or more trade and tariff agreements between several countries. This primary level of integration gives rise to more substantial commitments for the establishment of a higher level of economic integration..
The general objective of this treaty is to develop economies of scale and comparative advantages, promoting economic efficiency..
At this level, the countries that are part of the agreement eliminate all barriers to trade. However, they have the independence to freely establish trade policies with non-member nations..
This level of economic integration provides for economic cooperation, as in the free trade area, eliminating trade barriers between member countries. The main difference with the previous level is that it is agreed that all apply in a similar way regarding trade with third countries.
This level allows the creation of economically integrated markets between member countries. Trade barriers are removed, as are any restrictions on the movement of labor and capital between these countries..
As in customs unions, a common commercial policy is applied for trade with non-member countries. The main advantage is that workers will no longer need a visa or a work permit to work in any other member country of the common market..
This level originates when countries enter into an economic agreement to eliminate barriers to trade and also adopt common economic policies..
There is also free movement of labor. Monetary and fiscal policies among member countries are harmonized, implying a certain level of political integration. One more step refers to the monetary union, where a common currency is used.
In 1988, the United States and Canada signed a Free Trade Agreement with each other. Shortly after its implementation, the United States began negotiating a similar agreement with Mexico..
When Canada requested to be part of that negotiation, negotiations began for NAFTA, signed in 1992 and implemented in 1994..
Its objective has been to promote trade between Canada, the United States and Mexico. By reducing tariffs and trade barriers, it seeks to create a free trade area where companies can benefit from the transfer of products.
This integration originally began in 1950, seeking to end the wars between European countries. Seven years later, the European Economic Community (EEC) was established, with the signing of the Treaty of Rome, creating a common market among the members.
The 1993 Maastricht Treaty stands out as the moment when the EU economic union was created, identifying three objectives.
- Establish a single common currency, which came into force in 1999.
- Establish monetary and fiscal goals for member countries.
- The treaty called for a political union, which included the development of a common foreign and defense policy, as well as a common citizenship..
It was originally established in 1988 as a regional trade agreement between Brazil and Argentina, then expanded in 1991 to include Uruguay and Paraguay. Subsequently, Bolivia, Chile, Colombia, Ecuador and Peru have become associate members.
MERCOSUR countries make up almost half of the wealth created in Latin America. The group has focused more on developing the economies of its members, in order to be more competitive internationally and not depend on a closed market.
Although it is an economic integration initiative, MERCOSUR has also been designed with clear political objectives.
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