Question

Course - International Business

Regional trade agreements are changing the landscape of the global marketplace. Discuss the concept “regional economic integration” by highlighting (2) main types of regional economic integration and (1) one benefit and drawback of each type discussed.

Answer 1

Regional economic integration is the agreement between regions/ countries or areas to support free flow of trade amongst them by abolishing or minimising the tariffs or non tariffs barriers to trade. Major type of regional integration includes - Free trade Area, custom union.

Free trade area involve agreement between regions or countries for reduction or abolishing barriers for trade within the non memeber whereas countries can choose to have differential rates for non members this type of agreement has abenefit that this allows increase in trade flows among the memeber nation whereas the drawback is that since non members aree free to decide the barriers on non memebers.Some memeber countries are free to enter into more preferential trade agreement with another non members leading to negative impact in member countries

Custom union allows the reduced barriers among memeber nation as well as set tariffs for non member this helps the memeber nation to mutually benefit from I'm trade increase as well as exploitation of trade deal by one of the memeber nation gets limited, drawback includes forming seperate trade deals with other non members nation becomes difficult since there will be resistance from existing memeber s