Regional Economic Integration

Regional Economic Integration can best be defined as an agreement between groups of countries in a geographic region, to reduce and ultimately remove tariff and non-tariff barriers to the free flow of goods, services, and factors of production between each other.

Syllabus of UGC Net Commerce (Unit I)

Before proceeding to the topic let's see the relevance of this topic in the new syllabus of UGC Net Commerce examination issued by NTA.

Unit I – Business Environment and International Business 

  • Concepts and elements of business environment: Economic environment- Economic systems, Economic policies(Monetary and fiscal policies); Political environment, Role of government in business; Legal environment- Consumer Protection Act, FEMA; Socio-cultural factors and their influence on business; Corporate Social Responsibility (CSR)
  • Scope and importance of international business; Globalization and its drivers; Modes of entry into international business
  • Theories of international trade; Government intervention in international trade; Tariff and non-tariff barriers; India’s foreign trade policy
  • Foreign direct investment (FDI) and Foreign portfolio investment (FPI); Types of FDI, Costs and benefits of FDI to home and host countries; Trends in FDI; India’s FDI policy
  • Balance of payments (BOP): Importance and components of BOP
  • Regional Economic Integration: Levels of Regional Economic Integration; Trade creation and diversion effects; Regional Trade Agreements: European Union (EU), ASEAN, SAARC, NAFTA
  • International Economic institutions: IMF, World Bank, UNCTAD
  • World Trade Organisation (WTO): Functions and objectives of WTO; Agriculture Agreement; GATS; TRIPS; TRIMS
Check out complete syllabus of UGC Net Commerce - Click Here

Economic Integration

Economic integration refers to trade unification between different states by the partial or full abolishing of customs tariffs on trade taking place within the borders of each state.

Trade Agreement

A trade agreement is a contract/agreement/pact between two or more nations that outlines how they will work together to ensure mutual benefit in the field of trade and investment. This can be bilateral (2 countries) or multilateral (more than 2 countries).

Levels of Economic Integration

There are different levels of Economic Integration as follows:

1. Economic Market

2. Common Market

3. Custom Union

4. CECA

5. FTA

6. PTA

Preferential trade agreement (PTA)

A preferential trade agreement, is a trading bloc that gives preferential access to certain products from the participating countries. This is done by reducing tariffs but not by abolishing them completely. A PTA can be established through a trade pact. It is the first stage of economic integration.

Free trade agreement (FTA)

A free-trade area is a trade bloc whose member countries have signed a free-trade agreement (FTA), which eliminates tariffs, import quotas, and preferences on most (if not all) goods and services traded between them. Example - ASEAN FTA (Trade agreement within the Southeast Asian Nations).

CECA (Comprehensive Economic Cooperation Agreement) & CEPA (Comprehensive Economic partnership Agreement)

When the countries go beyond FTA and agree for a greater degree of economic integration which includes improving the attractiveness to capital and human resources, and to expand trade and investment, it would result in CECA or CEPA. While CECA comes first with elimination of tariffs, CEPA comes later including trade in services and investments. CEPA has a bit wider scope than CECA.

Customs Union

An agreement among countries to have free trade among themselves and to adopt common external barriers against any other country interested in exporting to these countries. Example: Gulf Cooperation Council (GCC).

Common Market

A type of custom union where there are common policies on product regulation, and free movement of goods and services, capital and labour.

Economic Union

An economic union is a type of trade bloc which is composed of a common market with a customs union. The participant countries have both common policies on product regulation, freedom of movement of goods, services and the factors of production (capital and labour) and a common external trade policy.

Economic and Monetary Union

When an economic union involves unifying currency it becomes a economic and monetary union. E.g. – Euro.

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