GLOBAL
ECONOMIC
INTEGRATION
PRESENTED BY :
NAVAL SINGH
NEHA GUPTA
NIRAPJEET BRAR
LOGO
Economic Integration
Economic integration refers to trade unification
between different states by the partial or full
abolishing of customs tariffs on trade taking
place within the borders of each state.
The level of integration defines the nature and
degree of economic links among countries
Economic Integration
Global: trade liberalization by GATT or WTO
Regional: preferential treatment between member
countries in the group
Bilateral: preferential treatment between two
trading countries
Regional and bilateral agreements are against the
MFN clause, but allowed under WTO.
Levels of economic integration
Free Trade Area
The free trade area is the least restrictive and
loosest form of economic integration among
countries
In a free trade area, many barriers to trade
among member countries are removed
no internal tariffs among members, but each
country imposes its own external tariffs to the
third country
Eg: NAFTA, AFTA, EFTA
Custom Union
Members of a customs union dismantle barriers to
trade in goods and services among themselves
A customs union establishes a common trade policy
with respect to non members
no internal tariffs but common external tariffs
Eg: Mercosur (Southern Common Market), CACM (Central
American Common Market),CARICOM (Caribbean
Community and Common Market)
Common Market
A common market has no barriers to trade among
members and has a common external trade policy
Factors of production are mobile among members
Members of a common market must be prepared to
cooperate closely in monetary, fiscal, and employment
policies
Eg: EU (European Union)
Economic Union
The creation of a true economic union requires
integration of economic policies in addition to the
free movement of goods, services, and factors of
production
Under this union, members would harmonize monetary
policies, taxation, and government spending and a
common currency would be used by all members
Eg: EMU (Economic and Monetary Union)
Political Union
Central political apparatus coordinates the
economic, social and foreign policy of the
member states.
Eg: EU countries, US
Global Economic Integration
Global economic integration generally speeds up
when trade restrictions have been lifted
between nations, allowing a freedom of trading
opportunity that may not have been previously
there.
Principle of comparative advantage which refers
to a situation whereby each nation shifts its
resources to its more competitive and productive
industries.
GATT(General Agreement on Trade and Tariff)
a voluntary agreement to give tariff concessions and
reduce restrictions on imports among the trading
countries of the world
Established in 1947
135 countries member of GATT
Principles of GATT
World Trade should be carried on non-discriminatory
basis.
A country should protect its domestic industry by
means of custom tariffs and not through Trade
barriers.
The GATT provides a framework within which the
negotiations can be held to reduce tariffs and other
trade barriers.
Problems
failed to liberalize trade in agricultural products to
any significant degree.
has experienced partial success in regulating trade
practices adopted by member countries
no enforcement power to discipline parties that
violate the rules.
WTO (World Trade Organization)
Established in 1995
151 members
OBJECTIVES
To raise standard of living and
income, ensuring full employment
To expand production and trade
Protecting environment
Ensuring better share for developing
countries.
Function S
Administering World Trade Organization (WTO) trade
agreement
Trade negotiation
Handling trade disputes
Monitoring national trade policy
SAARC
INDIA
PAKISTAN
BANGLADESH
SHRILANKA
NEPAL
MALDIVES
BHUTAN
OBJECTIVES
to promote the welfare of the people of South Asia
& to improve their quality of life.
to accelerate economic growth, social progress &
cultural developments in the region
to provide all individuals the oppertunity to live in
dignity & to realize their full potential.
to promote & strengthen collective self-reliance
among the countries of South Asia.
NAFTA
The North American Free
Trade Agreement or NAFTA,
which came into force on
January 1, 1994
•CANADA
•MEXICO
•U.S
FUNCTIONS
Eliminate trade barriers in various service sectors
belonging to its member nations.
Reduce high Mexican tariffs and help to promote
agricultural exports.
Assist firms spanning the three nations to bid on
government contracts.
ASEAN
The thrusts of ASEAN economic
cooperation in the 1990 include the
following
to fully implement the ASEAN Free Trade Area (AFTA);
to develop the region into a global base for the manufacture
of value added and technologically sophisticated products
geared towards servicing the region and world markets;
to enhance the industrial efficiency of the region through
exploiting complementary location advantages based on the
principles of market sharing and resource pooling;
to enhance the attractiveness of the region for investment
and as a tourist destination;
to cooperate in enhancing greater infrastructural
development which will contribute towards more efficient
business environment.
Factors driving Economic INTEGRATION
Improvements in the technology
Taste for the benefits of integration
Policies
Dimensions of Economic integration
AN
HUM TION
RA
MIG
TRADE OF
GOODS&
SERVICES
INTERNATIONAL
CAPITAL MOVEMENT
&
TRADE IN
FINANCIAL
SERVICES
Human Migration
Trade in goods & services
Reduction in shipping &
transportation costs
Reduction in artificial barriers to
international commerce
Drop in communication costs
International Capital Movement and
Trade in Financial Services
FDI In INDIA
Source:
www.nrifc.com
FDI used in china
Source :www.starmass.com
Source:www.oifc.in
Source:www.oifc.in
Communication
Societies that cut themselves off from
commerce with the rest of humanity do tend to
stagnate. However, the volume of international
commerce is probably not the critical
determinant of the spread of useful innovations
—provided that channels of communication
remain reasonably well open.
