Kahnert et al --> The process of removing progressively those discriminations which occur at national borders

Allen --> Economic integration may mean something different to nearly everyone

Furthermore for the Economic Integration Theory --> The theory of customs unions may be defined as that branch of tariff theory which deals with the effects of geographically discriminatory changes in trade barriers [among countries],

Machlup --> Process of combining separate economies into a larger economic region.

Why study economic integration theories? --> Chou, the main reason behind studying the traditional theory of economic integration is to evaluate the desirability of a customs union from the world's welfare point of view using static effects as criteria

Pioneer of the Study <-- Viner (1950) “The Customs Union Issue”

Statics Analysis --> First to identify concrete criteria to distinguish between the possible advantages and disadvantages of economic integration

Two or more countries enter into a trade agreement. Trade shifts from a high-cost supplier member country to a low-cost supplier member country in the union.

Imports are shifted from a low-cost supplier of a non-member country of the union to a high-cost supplier member country inside the union.

The whole customs union issue can be disentangled in the free trade-protection argument.

The main purpose of any customs union is to shift sources of supply. If this shift is from a high-cost to a low-cost source, customs unions are considered a movement towards free trade. If the shift is in the other direction, then customs unions are considered a movement towards free trade. If the shift is in the other direction, then customs union may become a device for making tariff protection more effective.

Trade creation raises the home country's welfare, while trade diversion lowers it.

Economies of scale, where the larger the economic area of the customs union, the more likely is a customs union to operate in the free trade direction.

Customs unions are unlikely to provide more economic gains than harm, unless strict circumstances prevail.

Trade-diverting effects of customs union may outweigh their trade-creating effects, even if the resulting union tariff is lower than the average level of the previous tariff --> worldwide non-discrimination of trade barriers.

Countries are motivated to integrate if integration is likely to produce static gains more than losses --> trade creation more than trade diversion.

Customs union may actually lead to misallocation of the world's resources. Viner's analysis is only true under conditions of inelastic demand and completely elastic supply.

If demand was allowed to be more elastic, Meade concludes that a customs union may actually increase the volume of trade even though there is trade diversion.

The good thing --> Trade creation in the sense that production shifts from the high-cost source to the low-cost source is considered

Bad thing --> trade diversion is considered the "bad thing" in terms of economic welfare

May actually be welfare-increasing if we take into account both production and substitution effects

The diversion to a high-cost supplier country may be more than outweighed by the welfare gains resulting from the reduced prices to consumers due to the elimination of tariff on imports.

Additional welfare may be gained if we consider the secondary effects on complements and substitute goods

Must trace out the repercussions of the tariff reduction of a single commodity on all the quantities of all the products traded internationally to be able to assess the actual effect of this change on the economic welfare of the country.

A small reduction in tariffs must raise welfare, while a large reduction may raise or lower it.

Economic welfare is more likely to raise in the case of tariffs being merely reduced, than being completely removed.

Initial stages of tariff reductions raise welfare, while final stages lower it, depending on the specific assumptions made in that study.

The welfare impacts of economic integration so far have assumed that the country at question is a small country with no effect on world prices.

Large Country --> change world prices, and if this country levies a tariff, it will reduce the demand for imports and will therefore cause the prices of those imported goods to fall in world markets relative to its exports, and thus improving its terms of trade

Allowing for the terms of trade effect, will dramatically alter the perspective of the analysis.

Viner, Meyer and Lipsey --> Gains will arise between countries of a union if they are producing the same commodity

Makower and Morton --> gains will be larger the larger is the difference between the costs at which the same commodity is produced in the countries of the union, under the assumption of fixed demand

Meade --> customs union may be welfare increasing if the partner countries are actually competitive but potentially complementary

model of factor-proportions states that a country will have a comparative advantage in those products which require factors of production that are relatively abundant and therefore relatively cheap within its borders.

That a country cannot enjoy a comparative advantage in any good without it being produced or demanded for the domestic market first

Countries should enjoy more trade potential if they have similar per capita incomes according to the Linder hypothesis, or different per capita incomes according to the comparative advantage theory or the H-O model.

Balassa and Cooper and Massell --> Firts ones in introduced this term

Brada and Mendez --> integration is assumed to raise investment and reduce risks by the fact that a larger market will raise the expected return on investments and reduce uncertainty by enabling firms to lower their costs as a result of increased economies of scale, and a bigger pool of consumers

Schiff and Winters --> anything that affects the country's rate of economic growth over the medium term.

"New regionalism" --> represented by dynamic effects such as increased competition, investment flows, economies of scale, technology transfer, and improved productivity.

"Old regionalism"--> The static effects and developments of the theory of economic integration so far (Viner and developments)

Lawrence --> pointed out that the forces driving the current integration developments differ radically from those driving previous waves of regionalism.

Issues of private sector participation, competition, foreign direct investment (FDI), and the increased importance of services all contributed to changing the scenes from those that prevailed during the Viner and following near period.

Corden --> first introduced the concept of economies of scale into the customs union theory.

Result from the efficient use of factors of production at large outputs.

Balassa and Stoutjesdijk --> Small markets increase costs, limit the extent of product specialization, reduce competition, and lessen the incentives for technological improvements.

When investment barriers are removed, investment creation is the case when production is moved from a high-cost source to a lower-cost source in the union.

Investment diversion occurs when production is moved from a low-cost non-member country to a higher-cost member country of the union as a result of the PTA.

The current wave of regionalism or integration is a supported by private firms.

The world services sector has been booming both in terms of contribution to world trade and world GDP.

Direct investment is nowadays much more prominent, and is growing faster than trade.

Foreign direct investments are nowadays considered a major incentive of integration between countries, especially if integration is between developing countries, because of its link with two important variables; exports and economic growth.

Lawrence --> Foreign investment and exports are increasingly becoming complementary activities, and that the relation between them may work in both ways

FDI can lead to better economic integration benefits in terms of trade expansion, while others argue that economic integration can lead to more FDI flows to the region.

Ezenwe --> Economic integration must be seen as part of a process in which the final outcome will be determined by political factors

Allen --> One cannot really separate the economic from the political elements of integration, as economic losses and gains from integration are in some cases systematically related to political factors.

Kitamura, Heimenz, Langhammer and World Bank --> One of the possible political motives of economic integration is the ability of the member countries to strengthen their bargaining power in international negotiations

Lorenz, Grossman, Helpman, Schiff and Winters --> Public officials may enter into trade agreements to gain support of certain interest groups/lobbies, whether export-oriented or import-competing sectors, or others such as certain labor unions or those responsible for fiscal sustainability fearing import duty losses

Producers --> Have more political weight than consumers

PTA in general will be favored politically than free non-preferential trade

PTA that is trade-diverting will be favored politically than a PTA that is trade-creating.

Rueda-Juanquera --> Importance of political leadership in any economic integration initiative

Mansfield and Milner --> In order for a PTA to succeed, substantial institutional heterogeneity is needed

Axline --> A smaller group of the former members of an unsuccessful integration scheme may launch a successful integration scheme of their own.

Refers to the need to further change barriers other than tariffs (shallow integration) such as reconciling different national practices with common rules and supra-national implementation mechanisms.

Hirschman --> The prospect of less freedom in implementation of such internal policies is precisely what makes governments so skittish about entering into effective trade integration agreements

Economic integration schemes require strong political commitment on the part of member countries to be able to advance to common objectives

Desire to form economic integration arrangements between political allies that do not permit their adversaries to join the arrangement

Axline and Inotai --> politicians and economists of developing countries may actually encourage economic integration schemes with other developing countries as a mean of strengthening their self- reliance and gradually eliminating the historically deep economic and structural dependence of their countries on the developed world.

Inotai --> The opposite happens in developing countries, where economic integration is often derived from political concepts and efforts, and is then forced to work on economically insufficiently prepared national economic agents

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Sadek, A. (2013). Theories of Economic Integration: A Survey of the Economic and Political Literature. International Journal of Economy, Management and Social Sciences. 2 (5), 133-155.