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Theory of Economic Integration
Descriptive background
Katarzyna Ś[email protected]
www.wne.uw.edu.pl/~sledziewska
What is economic integration?What is regionalism?
• Definition and significance
International economic integration
• Complex notion which must be defined with care• Does not have a clear-cut meaning for all economists• Definitions are often vague
– Mess– Process or stage?
International economic integration
• Pinder (1969) – Combination of parts into the whole.
• Union is a outcome of the combination of these parts or members
– A process towards union– Removal of discrimination between economic agents of the
member countries
• Kahnert te al.. (1969) – Process of the progressive removal of discrimination that exists
along national borders
• Mennis and Sauvant (1976)– Process whereby boundaries between nation-states become
less discontinuous, thereby leading to the formation of more comprehensive systems.
International economic integration
• Pelkmans (1984)– Elimination of economic frontiers between two or more
economies. – Economic frontier
• A demarcation line across which the mobility of goods, services and factors is relatively low.
• Balassa (1973) – Process – the removal of discrimination between different states– State of affairs – the absence of different forms of discrimination
• Swann (1996)– Process or state of affairs that involves the combination of
previously separate economies into larger arrangements
International economic integration
• Molle (1991)– Prograssive elimination of economic frontiers between countries– This progress is gradual
• El-Agraa (1985)– Discriminatory removal of all trade impediments between
participating nations and the establishment of certain elements of coordination between them
International economic integration
• Tinbergen (1954) – Negative integration – removal of discriminatory and restrictive
institutions and the introduction of freedom for economic transactions– Positive integration – the adjustment of existing and the establishment
of new policies and institutions endowed with coercive powers
• Economic integration Goode (2003)– All economies, except those practicing autarky, are to some extent
integrated• The term usually reserved for groups of economies that are manifestly
combining their activities more quickly among themselves than with others– Market-led integration – spontaneous integration without the formal
involvement of governments– Policy-led integration – integration through intergovernmental
frameworks
Regionalism
• Bhagwati (1999)– Preferential trade agreements among a subset of nations
• Goode (2003)– actions by governments to liberalize or facilitate trade on regional basis– offers a quicker way to achieve results for the participating economies
than the full multilateral process
• Regional integration arrangement RIA Goode (2003)– bilateral or regional economic agreement
– seeks to achieve a degree of economic integration
• Regional trade arrangement RTA Goode (2003)– FTA, CU CM
International economic integration
• Economic integration agreements Goode (2003)– Cover free-trade arrangements in services
• Free trade in services requires the possibility of commercial presence in the importing country as well as the free movement of consumers and producers of services
• Involves greater degree of economic integration
Regionalism - WTO context
• More general– RTAs (regional trade agreements) may be agreements
concluded between countries not necessarily belonging to the same geographical region;
• EU and Turkey – no consesus exists on either geographical or cultural criteria
• More specific– the WTO provisions which relate specifically to conditions of
preferential trade liberalization with RTAshttp://www.wto.org/english/tratop_e/region_e/region_e.htm
Regionalism
• “Regionalism is in fashion.• It seems that every month brings news of yet another
agreement among a group of countries, or between one group and another, to strength their economic links, particularly by removing barriers to trade and investment among themselves”.
• Frankel (1997)
Evolution of Regional Trade Agreements in the world, 1948-2009• WTO members
– are bound to notify RTAs in which they participate– all of them have notified participation in one or more RTAs
(some are party to 20 or more)
• Notifications of RTAs– May refer to
• New agreement• the accession of new parties to an agreement that already exists
– In the period 1948-1994 → 123 notifications – Since 1995 → over 300
Evolution of Regional Trade Agreements in the world, 1948-2009
Average number of PTA participants per WTO member, 1958-2010, notified PTAs
Map of RTAs by country, participation in Regional Trade Agreements for goods and services
Mongolia
Somalia
Mauritania
A hierarchy of regional economic arrangements
Free trade area
Customs union
Common market
Economic union
