ECONOMIC INTEGRATION

Kabul
University
2015-16
GROUP MEMBERS
Ahmadullal Alizai
fayz Al Bary Faieq
Shafiqullah Alokozai
Ali Ahmad Ahmady
Niaz Mohammad Sahil
Mohammad Nazir
Content of the presentation
Introduction to Economic
Integration
Advantage of Economic
Integration
Disadvantage of Economic
Integration
Level of Economic
Integration
 Introduction
A process whereby countries cooperate with one
another to reduce or eliminate barriers to the
international flow of products, people or capital.
Basically there are two approaches to international
trade liberalization and economic integration: the
international approach and the regional approach.
The international approach involves international
conferences under WTO. The purpose of these
international conferences is to reduce barriers to
international trade and investment.
The regional approach involves agreements among a
small number of nations whose purpose is to establish
free trade among themselves while maintaining barriers
to trade with the rest of the world
Advantages Of Economic
Integration
Trade Creation: Member countries have
(a) wider selection of goods and services not previously
available;
(b) acquire goods and services at a lower cost after trade
barriers due to lowered tariffs or removal of tariffs .
(c) 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.
Employment Opportunities:
Political Cooperation:
Disadvantages Of Economic
Integration
Creation Of Trading Blocs: It can also increase trade
barriers against non-member countries.

Trade Diversion: Because of trade barriers, trade 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 cost.

National Sovereignty: Requires member countries to

give up some degree of control over key policies like
trade, monetary and fiscal policies. The higher the level
of integration, the greater the degree of controls that
needs to be given up particularly in the case of a political
union economic integration which requires nations to
give up a high degree of sovereignty.
LEVELS OF ECONOMIC INTEGRATION:

i. Preferential Trade Area

ii. Free Trade Area
iii. Customs Union
iv. Common Market
v. Economic Union
vi. Political Union
Preferential Trade Area:
Preferential trade agreements provide
lower barriers on trade among
participating nations than on trade with
nonmember nations. That is, lower tariffs
on imports of each other.
This is the loosest form of economic
integration.
A good example is the Commonwealth
Preference System , which was
established in 1932 among 48 Common
wealth countries of the British empire.
 Free Trade Area(FTA)

An agreement between two or more

countries to remove all trade barriers
between themselves.
A free trade area occurs when a group of
countries agree to eliminate tariffs between
themselves, but maintain their own external
tariff on imports from the rest of the world.

Examples ofFTA are: The ASEAN Free Trade

Agreement(AFTA) and the North American
Free Trade Areas(NAFTA).
Examples ofFTA
 Customs Union
An agreement between two or more countries to
remove tariffs between themselves and set a
common external tariff on imports from non-member
countries
Each country determines its own barriers and
maintains its own external tariffs on imports against
non-members.
A customs union has common policies on product
regulations and movement of factors of productions
in goods, services, capital and labor amongst
members
An example of a customs union is the established
customs union between theEuropean Unionand
Turkey, which came into effect in 1996.
Customs Union EXMPLE
 Common Market:
An agreement between two or more
countries to remove all barriers to
trade and allow free mobility of capital
and labor across member countries.
Harmonize trade policies by having
common external tariffs against non-
members.
Example is the European Union (EU)
previously known as European
Economic Community(EEC)
Economic Union
An agreement between two or more countries to
remove barriers to trade, allow free flow of labor and
capital and coordinate economic policies.
Sets trade policies through common external tariffs
on non-members.
Integration is more intense in an economic union
compared to a common market, as member countries
are required to harmonize their tax, monetary, and
fiscal policies and to create a common currency
Example is the European Union(EU) where economic
and monetary integration has created a single market
with a common euro currency
 Political Union:
An agreement between two or more countries to
coordinate their economic monetary and political
systems.
Required to accept a common stance on economic
and political policies against non-members.
Example is US where each US state has its own
government that sets policies and laws. But each
state grant control to the federal government over
foreign policies, agricultural policies, welfare
policies and monetary policies. Goods, services,
labor and capital can all move freely without any
restrictions among the US states and the
government sets a common external trade policy
The European Union in
brief
The European Union (EU) is an economic and
political union.
It is a unique economic and political
partnership between 28 European countries.
It has delivered half a century of peace,
stability, and prosperity, helped raise living
standards, launched a single European
currency, and is progressively building a
single Europe-wide market in which people,
goods, services, and capital move among
Member States as freely as within one
country
Why the European Union
The EUs mission in the 21st century is to:
maintain and build on the peace established
between its member states;
bring European countries together in
practical cooperation;
ensure that European citizens can live in
security;
promote economic and social solidarity;
preserve European identity and diversity in a
globalized world;
promulgate the values that Europeans share.
GOVERNANCE
The European Union has seven
institutions:
1. the European Parliament,
2. the Council of the European Union,
3. the European Commission,
4. the European Council,
5. the European Central Bank,
6. the Court of Justice of the European
Union
7. European Court of Auditors
Founders:
France,
Belgium,
Luxembourg,
Italy,
Nether lands,
Germany
THANKSSS FOR ATTENTION
 PREPARED BY
NIAZ SAHIL ZURMATI
STUDENT OF: BBA AT KABUL
UNIVERSITY
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