Advantages And Disadvantages Of Regional Economic Integration

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ADVANTAGES OF REGIONAL ECONOMIC INTEGRATION

Regional economic integration enhances political cooperation. Several group of nation can have significantly greater political influence than each nation would have by individually. This integration is an essential strategy to address the effects or issues of conflicts and political instability that may affect the region. Improved political cooperation due to regional economic integration is also useful tool to handle the social and economic challenges associated with globalization. Countries which are link together will be more dependent on each other that will reduce the likelihood of violent conflict between each nation. This integration will also give countries greater political clout when dealing …show more content…

Trade creation occurs when low cost producers within free trade area replace high cost domestic producers. These agreements create more opportunities for countries to trade with one another by removing the trade barriers and investment. Trade creation allows member countries for a wider selection of goods and services not previously available. They can acquire goods and services at a lower cost after trade barriers due to lowered tariffs or removal of tariffs which will encourage more trade between member countries the balance of money spend from cheaper goods and services, can be used to buy more products and services. Regional economic integration significantly contributes to the relatively high growth rates in the nation. By removing trade barriers between members countries the factor of production can be move …show more content…

The opposite side to trade creation is trade diversion. Trade diversion occurs when higher cost suppliers within the free trade area replace lower cost external suppliers. Member countries may trade more with each other than with non-member nations. This may increase trade with a less efficient or more expensive producer because it is in a member country. Weaker companies can be protected inadvertently with the bloc agreement acting as a trade barrier. In essence, regional agreements have formed new trade barriers with countries outside of the trading bloc. In a simple word, trade diversion is diverted from a non-member country to a member country despite the inefficiency in cost. For example, a country has to stop trading with a low cost manufacture in a non-member country and trade with a manufacturer in a member country which has a higher

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