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CHAPTER 3: ECONOMICS AND THE ROLE OF REGIONAL INTEGRATION - Coggle Diagram
CHAPTER 3: ECONOMICS AND THE ROLE OF REGIONAL INTEGRATION
1. The growth of regional economic integration
Early Beginnings (1860)
Cobden–Chevalier Treaty (UK & France, 1860) – First step towards regional trade agreements.
Post-WWII Developments (1948-Present):
1948: General Agreement on Tariffs and Trade (GATT) established.
1995: GATT evolved into the World Trade Organization (WTO)
Rise of Regional Trading Blocs:
ASEAN (Association of Southeast Asian Nations)
Mercosur
EU (European Union)
APEC (Asia-Pacific Economic Cooperation)
NAFTA (North American Free Trade Agreement)
Key Achievements of Economic Integration:
Reduction of trade barriers (tariffs, quotas).
Free flow of goods, services, and labor across regions.
EU as the most successful integration model:
Eliminated trade barriers.
Established the Euro as a strong common currency.
4. Economic integration in the Asia–Pacific region
Importance of the Asia–Pacific Region
One of the most dynamic and integrated economic regions.
Rapid economic growth and great cultural diversity.
Economic integration is a key development strategy for the region.
Growth of Economic Integration
Inter-regional Integration
Strengthening trade ties with global partners
Intra-regional Integration
Increasing trade within the Asia–Pacific region
Key Drivers of Integration
ASEAN (Association of Southeast Asian Nations)
Proliferation of Free Trade Agreements (FTAs)
Over 147 FTAs
Notable Economic Partnerships in the Region
ASEAN Free Trade Area (AFTA)
Regional Comprehensive Economic Partnership (RCEP)
15 members
Asia-Pacific Economic Cooperation (APEC)
21 members
Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)
12 members
5. Understanding the impact of regional integration on MNEs
Impact of Economic Integration on MNEs
Larger Markets & Trade Opportunities
Increased Competition
Key Strategic Decisions for Firms
Organisational Structure: Centralised vs. Decentralised
Centralised Decision-Making:
Decentralised Decision-Making:
Standardisation vs. Adaptation of Products
Standardisation Approach:
Adaptation Approach:
Balancing Trade-offs
Over-Adapting → High costs.
Over-Scaling → Missed location-based advantages.
Over-Focusing on National Differences → Supply chain vulnerabilities & coordination issues.
2. Types of economic integration
Definition
Agreements between countries to facilitate the free flow of goods, services, and factors of production.
2 types
Bilateral
India-Sri Lanka Free Trade Agreement (ISFTA)
Multilateral
Four Primary Forms of Economic Integration
Common Market
European Economic Area (EEA)
Customs Union
Mercosur, East African Community (EAC).
Free Trade Area (FTA)
NAFTA (now USMCA), ASEAN Free Trade Area.
Economic Union
European Union (EU) with the Euro currency
3. The costs and benefits of integrated arrangements
Benefits of Economic Integration
Larger & More Competitive Markets
Trade Creation
Improved Trading Terms
Reduced Monopoly Power
Greater Productivity
Cross-Cultural Understanding
Encourages Innovation
Costs & Challenges of Economic Integration
Trade Diversion
Unequal Gains Among Members
Loss of Economic Independence
Regulatory Challenges
