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Chapter 7 - International Integration

International Integration-KDQT

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21 views16 pages

Chapter 7 - International Integration

International Integration-KDQT

Uploaded by

linhchihd12
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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International Business

Chapter 7: International economic integration

MSc Pham Ha Trang

1
Content
1. Overview of international economic integration

1.1. Definition of international economic integration

1.2. Motives of of international economic integration

1.3. International economic integration levels

2. Economic integration around the world

3. Impacts of international economic integration


1. Overview of international economic integration
1.1. Definition of economic integration

Economic integration is the process of increasing economic interdependence among


countries in the world on the basis of eliminating trade and investment barriers

Removing barriers to trade and


investment between countries
Board globally
(Global economic
integration)
Ex: GATT, WTO

Scope
Reduce and eventually eliminate
Narrow trade and investment barriers
between countries in a region
(Regional
economic
integration) Regional economic blocs: EU,
ASEAN, APEC…
1. Overview of international economic integration
1.2. Motives of international economic integration

• Increase the scale of production, trade,


consumption
• Create better choices, lower prices for consumers
• Higher labor productivity
• Improve and raise people's living standards
• Protect intellectual property rights, protect the
environment
• Establish political alliances

Global economic integration and regional economic integration always go hand in hand
1. Overview of international economic integration
1.3. International economic integration levels

Political Union

CM + common fiscal, monetary, labor, social


Economic Union policies, common bank, common currency

Common Market CU + remove barriers to intra-bloc


capital and labor

Custom Union FTA + common trade policy outside the bloc

Free trade Area Eliminate trade barriers


(FTA)
1. Overview of international economic integration
1.3. International economic integration levels

Free Trade Area (FTA)


• Lowest level of economic integration

• Accounts for 90% of the number of regional blocs in the world

• All barriers to the movement of goods and services between


member countries are eliminated

• Each member country has the right to apply its own trade policy
towards countries outside the bloc

• Restrictions on the movement of production factors (e.g. labor,


capital, etc.) are still maintained

• Usually have regulations on localization rates


1. Overview of international economic integration
1.3. International economic integration levels

Summary of FTAs ​Vietnam participates in as of May 2024

Source: Government Electronic Information Portal

16 FTAs ​signed and implemented, 3 FTAs ​under negotiation


1. Overview of international economic integration
1.3. International economic integration levels

Custom Union

• All barriers to the movement of goods and


services between member countries are
eliminated

• Members must adopt a unified trade policy


towards countries outside the bloc

• Example: Mercosur – South American trade bloc


1. Overview of international economic integration
1.3. International economic integration levels

Common Market

• Member states remove barriers to the flow of


goods, services, labor, capital, and technology
within the bloc
• Adopt a common trade policy toward non-bloc
countries
• Require close policy cooperation between member
states on labor and capital
• Member states benefit unevenly as labor and capital
move to higher wage/profit areas
• Example: European Union (EU) 1992-1999
1. Overview of international economic integration
1.3. International economic integration levels

Economic Union

• Member states agree to liberalize trade, allowing free movement of goods, services,
labor and capital within the bloc
• Apply common monetary and fiscal policies, issue unified product standards, develop
common agricultural, energy and social services policies
• Implement common trade policies towards non-member states
• Example: EU (1999 - present)
1. Overview of international economic integration
1.3. International economic integration levels

EU after 1999

Common agricultural, energy and


social services policy

Common product standards


Common currency
(pharmaceuticals and medical devices)
2. Economic integration around the world
2.1. Economic integration in Europe

European Union (EU)


2. Economic integration around the world
2.2. Economic integration in America

NAFTA
2. Economic integration around the world
2.3. Economic integration in Asia

ASEAN
3. Impacts of international economic integration
3.1. Positive impacts

• Increased welfare due to increased trade volume, increased choice,


and lower prices
• Saving administrative costs for goods and services (elimination of
customs posts)
• Increasing consensus, political cooperation, and bargaining power
• Reducing the risk of confrontation between member countries
• Increasing competition, reducing monopoly
• Exploiting economies of scale, developing intra-industry trade
• Increasing intra-industry and extra-industry investment, changing
industry structure, increasing income and demand
• Increasing international mobility of other factors of production
3. Impacts of international economic integration
3.2. Negative impacts

• Trade diversion
• Increasing barriers to international trade
• Loss of jobs
• Requiring member states to sacrifice some of their
sovereignty
• Eroding national traditions and cultural identity

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