Introduction Types of regional economic integration Neo-classical theory of economic integration Regional trade agreements Regionalism and the new trade

Introduction

Types of regional economic integration

Neo-classical theory of economic integration

Regional trade agreements

Regionalism and the new trade theory

Europe and the European Union

Future enlargement of the European Union

Conclusions

CHAPTER 13; ECONOMIC INTEGRATIONInternational Trade & the World Economy; Charles van Marrewijk

Explanations for trade

Classical 2. Opportunity costs 3. Comparative advantage

Neo-classical 4. Production structure 5. Factor prices 6. Production volume 7. Factor abundance

1. The world economy

New trade 9. Imperfect competition 10. Intra-industry trade

Policy

8. Trade policy

11. Strategic trade policy

12. Int. trade organizations 13. Economic integration

17. Applied trade policy modeling

Economicgeography

New interactions 14. Geographical economics 15. Multinationals 16. New goods, growth, and development

Industrialorganization

Internationalbusiness

Growth theory

Part

IPa

rt I

IP

art

III

Part

IV

18. Concluding remarks

Introduction







Conclusions


Introduction International Trade & the World Economy; Charles van Marrewijk

Objectives / key terms

Preferential trade agreement Free trade area / customs union

Trade-creation / trade-diversion Regionalism / multilateralism

European Union (EU) EU enlargement

Jacob Viner (1892 - 1970)

Introduction







Conclusions


Types of regional economic integration International Trade & the World Economy; Charles van Marrewijk

Preferential trade agreement (PTA); ACP countries

Free trade area (FTA); EFTA, NAFTA

Customs union; EEC

Common market; EU

Economic union; EMU

Introduction







Conclusions


Neo-classical theory of economic integration International Trade & the World Economy; Charles van Marrewijk

quantity

demand

supply

price

pC

pB

pB+tpC+t

tariff

tariff

q0 q1 q4q3

imports after customs union

imports before customs union

decrease producer surplus

net gain

increase consumer surplus

decrease government revenue

Trade creation

Neo-classical theory of economic integration International Trade & the World Economy; Charles van Marrewijk

quantity

demand

supply

price

pB

pC

pC+t

pB+ttariff

tariff

q0 q1 q4q3

imports after customs union

imports before customs union

decrease producer surplus

net gain; possible loss

increase consumer surplus

decrease government revenue

-/-

Trade diversion

Introduction







Conclusions


Regional trade agreements International Trade & the World Economy; Charles van Marrewijk

MadagascarZimbabwe

Zambia

Namibia

Angola

ZaireUgandaKenya

Ethiopia

Sudan

EgyptCOMESA countries

Regional trade agreements International Trade & the World Economy; Charles van Marrewijk

Cambodia

Philippines

Malaysia

Indonesia

Indonesia

Indonesia

Malaysia

Indonesia

Thailand

Viet Nam

Lao PDRMyanmar

ASEAN countries


International Trade & the World Economy; Charles van Marrewijk

Argentina

Brazil

Bolivia

Peru

Venezuela

Colombia

Mexico

United States

Canada

RTAs in AmericaNAFTA (3)CARICOM (13)CACM (5)ANDEAN (5)MERCOSUR (4)

Introduction







Conclusions


Regionalism and the new trade theory International Trade & the World Economy; Charles van Marrewijk

0.85

0.9

0.95

1

0 5 10 15 20

Number of trading blocs

No

rma

lize

d to

tal w

elfa

re

t = 0.3

t = 0.5

t = 0.7

a

Using a Dixit-Stiglitz type model with the world consisting of many provinces which may form b trading blocs, welfare is non-monotonic

Introduction







Conclusions


Europe and the European Union International Trade & the World Economy; Charles van Marrewijk

Table 13.2 Overview of European Union economic integration

1951 ECSC European Coal and Steel Community

Membership Belgium, France, Luxembourg, Netherlands, Italy & W. Germany

1957 EURATOM European Atomic Energy Community

1957 EEC European Economic Community

1967 EC European Communities; combining ECSC, EEC, and EURATOM

1973 Membership + United Kingdom, Ireland, and Denmark

1981 Membership + Greece

1986 Membership + Spain and Portugal

1990 Membership + East Germany (re-unification of West and East Germany)

1993 EU European Union

1995 Membership + Finland, Austria, and Sweden

1999 EMU Economic and Monetary Union

Europe and the European Union International Trade & the World Economy; Charles van Marrewijk

Establishing a common market (EEC treaty) with four freedoms:

• Free movement of goods (Cassis-de-Dijon case, 1979).

• Free movement of persons

• Free movement of services

• Free movement of capital

The main institutions of the European Union are:

• The Council of the European Union

• The European Commission;

• The European Parliament;

• The European Court of Justice

• The European Central Bank (ECB)


International Trade & the World Economy; Charles van Marrewijk

$$

$

$

$

$

$$$

$

$

$

E

E

#

#

#

E

#

#

greece

belgium

netherlands

ireland

portugal

malta

bulgaria

slovakia

latvia

estonia

lithuania

united kingdom

turkey

romania

austria

denmark

franceswitzerland

italy

spain

slovenia

hungary

czech republic

poland

finlandsweden

norway

iceland

germany

RTAs in Europe

EU (15)EFTA (3)CEFTA (7)

Green circle:

former EFTA

Red star:

potential EU member

Introduction







Conclusions


Future enlargement of the European Union International Trade & the World Economy; Charles van Marrewijk

a. population (millions)

0 20 40 60 80

greece

netherlands

romania

poland

spain

italy

france

united kingdom

turkey

germany

b. size (1000 km 2)

0 200 400 600 800

romania

united kingdom

italy

poland

finland

germany

sweden

spain

france

turkey

Future enlargement of the European Union International Trade & the World Economy; Charles van Marrewijk

c. GDP (billion PPS)

0 500 1000 1500 2000

sweden

belgium

poland

netherlands

turkey

spain

italy

france

united kingdom

germany

d. GDP/cap (PPS)

0 20,000 40,000

sweden

united kingdom

finland

germany

austria

belgium

ireland

netherlands

denmark

luxembourg

Introduction







Conclusions


Conclusions International Trade & the World Economy; Charles van Marrewijk

• There are many regional trade agreements (RTAs) in the world.

• We also distinguish FTAs, customs union, common market, economic union.

• RTAs in general increase welfare through trade creation, but the discriminatory nature of an RTA may make the net welfare effect negative.

• Increased popularity of Regionalism rather than Multilateralism may be bad for the world economy.

• EU is most succesful and powerful economic integration scheme; many CEE countries want to join; EU’s political decision process needs to be revised.

Documents

Introduction Types of regional economic integration Neo-classical theory of economic integration Regional trade agreements Regionalism and the new trade