GLOBAL

ECONOMIC
INTEGRATION

PRESENTED BY :
NAVAL SINGH
NEHA GUPTA
NIRAPJEET BRAR
LOGO
 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.
 The level of integration defines the nature and
degree of economic links among countries
 Economic Integration

 Global: trade liberalization by GATT or WTO

 Regional: preferential treatment between member

countries in the group

 Bilateral: preferential treatment between two

trading countries
 Regional and bilateral agreements are against the
MFN clause, but allowed under WTO.
Levels of economic integration
 Free Trade Area

 The free trade area is the least restrictive and

loosest form of economic integration among
countries
 In a free trade area, many barriers to trade
among member countries are removed
 no internal tariffs among members, but each
country imposes its own external tariffs to the
third country
 Eg: NAFTA, AFTA, EFTA
 Custom Union
 Members of a customs union dismantle barriers to
trade in goods and services among themselves
 A customs union establishes a common trade policy
with respect to non members
no internal tariffs but common external tariffs
Eg: Mercosur (Southern Common Market), CACM (Central
American Common Market),CARICOM (Caribbean
Community and Common Market)
Common Market
 A common market has no barriers to trade among
members and has a common external trade policy
 Factors of production are mobile among members
 Members of a common market must be prepared to
cooperate closely in monetary, fiscal, and employment
policies
Eg: EU (European Union)
 Economic Union

 The creation of a true economic union requires

integration of economic policies in addition to the
free movement of goods, services, and factors of
production
 Under this union, members would harmonize monetary
policies, taxation, and government spending and a
common currency would be used by all members
Eg: EMU (Economic and Monetary Union)
 Political Union
 Central political apparatus coordinates the
economic, social and foreign policy of the
member states.
 Eg: EU countries, US
 Global Economic Integration

 Global economic integration generally speeds up

when trade restrictions have been lifted
between nations, allowing a freedom of trading
opportunity that may not have been previously
there.
 Principle of comparative advantage which refers
to a situation whereby each nation shifts its
resources to its more competitive and productive
industries.
 GATT(General Agreement on Trade and Tariff)

 a voluntary agreement to give tariff concessions and

reduce restrictions on imports among the trading
countries of the world

 Established in 1947

 135 countries member of GATT

 Principles of GATT

 World Trade should be carried on non-discriminatory

basis.
 A country should protect its domestic industry by
means of custom tariffs and not through Trade
barriers.
 The GATT provides a framework within which the
negotiations can be held to reduce tariffs and other
trade barriers.
 Problems

 failed to liberalize trade in agricultural products to

any significant degree.

 has experienced partial success in regulating trade

practices adopted by member countries

 no enforcement power to discipline parties that

violate the rules.
 WTO (World Trade Organization)

Established in 1995

151 members
OBJECTIVES

 To raise standard of living and

income, ensuring full employment

 To expand production and trade

 Protecting environment

 Ensuring better share for developing

countries.
 Function S

 Administering World Trade Organization (WTO) trade

agreement

 Trade negotiation

 Handling trade disputes

 Monitoring national trade policy

 SAARC

INDIA
PAKISTAN
BANGLADESH
SHRILANKA
NEPAL
MALDIVES
BHUTAN
 OBJECTIVES

 to promote the welfare of the people of South Asia

& to improve their quality of life.

 to accelerate economic growth, social progress &

cultural developments in the region

 to provide all individuals the oppertunity to live in

dignity & to realize their full potential.

 to promote & strengthen collective self-reliance

among the countries of South Asia.
 NAFTA
The North American Free
Trade Agreement or NAFTA,
which came into force on
January 1, 1994

•CANADA
•MEXICO
•U.S
 FUNCTIONS

 Eliminate trade barriers in various service sectors

belonging to its member nations.

 Reduce high Mexican tariffs and help to promote

agricultural exports.

 Assist firms spanning the three nations to bid on

government contracts.
ASEAN
 The thrusts of ASEAN economic
cooperation in the 1990 include the
following
 to fully implement the ASEAN Free Trade Area (AFTA);
 to develop the region into a global base for the manufacture
of value added and technologically sophisticated products
geared towards servicing the region and world markets;
 to enhance the industrial efficiency of the region through
exploiting complementary location advantages based on the
principles of market sharing and resource pooling;
 to enhance the attractiveness of the region for investment
and as a tourist destination;
 to cooperate in enhancing greater infrastructural
development which will contribute towards more efficient
business environment.
Factors driving Economic INTEGRATION

 Improvements in the technology

 Taste for the benefits of integration

 Policies
Dimensions of Economic integration

AN
HUM TION
RA
MIG

TRADE OF
GOODS&
SERVICES

INTERNATIONAL
CAPITAL MOVEMENT
&
TRADE IN
FINANCIAL
SERVICES
Human Migration
Trade in goods & services

 Reduction in shipping &

transportation costs
 Reduction in artificial barriers to
international commerce
 Drop in communication costs
International Capital Movement and
Trade in Financial Services
FDI In INDIA

Source:
www.nrifc.com
FDI used in china

Source :www.starmass.com
Source:www.oifc.in
Source:www.oifc.in
 Communication
 Societies that cut themselves off from
commerce with the rest of humanity do tend to
stagnate. However, the volume of international
commerce is probably not the critical
determinant of the spread of useful innovations
—provided that channels of communication
remain reasonably well open.