International Economic
Integration
The Changing World Context
The world trade organizations
Globalization and Economic Activity
International trade and capital flows were hindered by trade barriers and capital controls.
Economic policies were dominated by myopic domestic considerations and the international element of these policies was often set aside.
Increased trade and capital flows as a result of globalization necessitate the presence of international institutions in order to regulate these flows.
There are three such international institutions
IMF
World Bank
WTO
Responsible for international trade agreements and for resolving trade disputes.
Supports the world's financial stability by providing financial assistance to developed and transition economies in time of crisis.
Whose primary scope is the promotion of economic development by providing long-term loans to poor countries.
The WTO is the successor to the GATT, which was signed in 1947 in Geneva by 23 countries
Was designed to provide an international forum for encouraging free trade between member states by regulating and reducing tariffs on traded goods.
International monetary fund
The IMF examines the economies of all its member states on a regular
basis.
Some of the element that include a program for stabilizations are:
Contractionary fiscal policy
Currency devaluation
Contractionary monetary policy
Contractionary income policy
Economic liberalization
The World Bank provides two main types of loans:
Investment loans
Adjustment loans
Economic Integration among Developing countries.
Economic integration in Europe
Economic Integration
Economic Integration in North America (NAFTA)
Refers to the discriminate reduction or elimination of trade barriers among participating nations.
A custom union is similar to the free-trade area and in addition participating countries pursue common external trade relations whereby they set common external tariffs on imports from nonparticipating nations
An economic union implies not only a common market but also the coordination and unification of economic policies so as to ensure effective free factor mobility
A free-trade area refers to a group of countries where all trade barriers among members are removed but each participating country remains trade barriers to third countries
The single Market
The single market is the core of the EU, the central objective of the Rome Treaty was the integration of the economies of member states with the purpose of creating the conditions for greater economic efficiency
Economic and Monetary union
Historical Background
System of Central Banks (SCB)
The principle of the economic and monetary union (EMU) became formally a community target at the Hague summit in 1969 where the EEC leaders agreed to proceed gradually.
The Delors report defined EMU as a currency zone where the conduct of economic policy is the result of collective effort for achieving common objectives and set three prerequisites:
Complete removal of restrictions on capital movements and the integration of financial markets.
The irrevocable fixing of parity rates.
Total and irreversible convertibility of the currencies of members states.
The report include a list of four basic parameters that were considered a necessary condition for the achievement of economic growth.
The existence of an effective competition policy and other market strengthening measures.
The existence of common policies aimed at structural changes and regional development.
The single market with complete liberalization in the movement of goods, services, and factors of production.
The coordination of macroeconomic policies with special emphasis on fiscal policy
The North America free trade agreements (NAFTA) was signed in December 1992 and came into force on January 1, 1994, between the US, Canada, and Mexico\
It presents a previos bilateral free-trade agreement between the US, Canada and extend to Mexico the obligation to liberalize trade and Investment.
The Nafta is in reality a loose regional arrangement, and it does not involve any surrender of sovereignty.
NAFTA reflects a structural adjustment of the US economy in order to face increased competition
Developing countries form regional arrangements in an attempt to help growth and achieve fundamental structural changes.
Such a regional arrangement would create a market large enough to support large-scale production and would eventually bring a reduction in production costs through economies of scale that would enable international competition without protection.
The adoption of outward-looking policies during the 1980's and 1990s folloqing economic reforms toward trade and financial liberalization, the wave of globalization, and the fall of communism brought a new momentum to regionalism whereby many such arrangement were strengthened and new ones formed.
Economic Integration in Africa
Economic Integration in Asia
SAARC
ASEAN
APEC
Association of the South East Asian Nations, which comprises ten nations (Brunei, Cambodia, Indonesia,Laos,Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam
It originated from the desire to have closer political and security cooperation in the region.
South Asian Association for Regional Cooperations, comprises seven nations (Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka)
This arrangement mostly involves functional cooperation in the areas of agriculture, poverty alleviation, transport and telecommunication.
The Asian Pacific economic cooperation, is a forum for discussing the economic issues affecting it's members
Its formed by Australia, Canada, Japan, New Zealand, South Korea, and the US. Later on in 1991, China, Hong Kong, and Taiwan joined. Last in 1998, Peru, Russia, and Vietnam joined the APEC
SADC
SACU
COMESA
ECOWAS
Economic community of West African States
The ECOWAS is part of the first integration wave in Africa inspired by the success of European integration.
It was set up in 1975 with Nigeria main driving force and has 16 members states.
Common market for Eastern and Southern Africa
The COMESA was an ambitious plan to create not only a customs union but also an economic and monetary union.
Was established in 1993 and has 21 members
Southern African Development Community
SADC was founded in 1992 and succeeded the Southern African development coordination conference (SADCC)
It has 14 Members, which their objective are in the direction of regional economic intergration.
Southern African Customs Union
The Sacu was established in 1969, which has 5 members (Botswana, Lesotho, Swaziland, South Africa, Namibia.)
It is a customs union with a reasonably free movement of labor and capital and a common external tariff.
Economic Integration in the Middle East
Economic Integration in Latin America and Caribbean
CARICOM
MERCOSUR
Was formed by Argentina, Brazil Paraguay, and Uruguay, later on joined by Bolivia and Chile
It is considered a success story as it bought together the two main economic powers (Argentina, Brazil) , against a background of political changes and economic policy reform
Was formed between Antigua, Barbados, Belize, Dominica, Grenada, Guyana, Jamaica, Montserrat, St.Kitt-Nevis, St Lucia, St.Vincent and the Grenadines, Suriname, and Trinidad and Tobago in 1973
The Middle East has had less success with economic integration than has any other part of the world.
There has been several attempts at regional integrations such as:
CAEU
GCC
AL
Was created in 1945 to promote close links among Arab states and to promote political, economic, social, and military cooperation
Was created to promote economic integration of all AL states
Was established between Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates, whose goal was to form a common market.