GBDA 102 Lecture Notes - Lecture 4: Free-Trade Area, Market Distortion, Customs Union

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Class 4
Regional economic integration: countries of a region cooperating to reduce or eliminate
barriers to the international flow of products, people, or capital
oEg. Mexico and Canada
oWhy? There is no perfect competition in the world, only market distortion
Education, roads, facilities
Each country has its own benefits and rules, so it is hard to reach a
consensus
Different types of REI
oFree trade area (NAFTA)
Removes trade barriers in goods/services among member countries
oCustoms union
Coordinates trade policies towards non-member countries
Removes trade barriers in goods/services among member countries
oCommon market
Free flow of capital and labors
Coordinates trade policies towards non-member countries
Removes trade barriers in goods/services among member countries
oEconomic Union
Coordinate economic policies among member countries
Free flow of capital and labors
Coordinates trade policies towards non-member countries
Removes trade barriers in goods/services among member countries
oPolitical Union
Coordinate political policies among member countries
Coordinate economic policies among member countries
Free flow of capital and labors
Coordinates trade policies towards non-member countries
Removes trade barriers in goods/services among member countries
Benefits and Drawbacks of integration?
oThink about how it is different/the same as globalization
oBenefits:
Trade creation – if it’s a small country with a small market, it can expand
the production/economies of scale with trade
Greater consensus – easier to reach a consensus and promote economy
and investment
Political cooperation – economic integration between countries, it is less
possible to have any sort of conflicts with said country
Creates Jobs
oDrawbacks
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