The industry works at a different pace in the present times, and there are certain techniques which can be used only in case there is a particular economic angle provided to it in the first place. Well, there is no doubt that economic integration is one of the techniques for sure.
With the help of economic integration, the markets can be easily expanded in a way to make sure that the purchasing power of the people is increased as well. The unification of certain economics into one single category with the purpose of creating a larger and unified economy is known as the process of economic integration.
This post is dedicated to the explanation of economic integration. Here we are going to have a discussion about the concept and also the benefits that it has. We are also going to talk about the costs which are associated with economic integration too.
An Introduction To Economic Integration
Trades in different countries have certain restrictions as well as some tariffs, which can be issued in a very discriminatory manner for sure.
The discrimination is something which depends on community and country discrimination as well.
The policy of economic integration is purely commercial, and it takes place in order to make sure that certain trade barriers are reduced in the best way so that some nations can be unified together.
Understanding All About Economic Integration
The industrial system in the modern times in resting upon the use of certain techniques which are only applicable from an economic point of view if there is a production that is taking place on a proper large scale.
This will require the expanding of the markets on one side and also the increase in the purchasing power of the people on the next side. When it comes to defining economic integration, it can be said that it is basically the unification of different economies to produce a larger economy.
The restrictions and tariffs are applied upon the trades in a very discriminatory manner. This is the discrimination which comes along in two different forms, which are the community discrimination and country discrimination too.
When we are talking about Salvatore, the economic integration can be defined as a proper commercial policy of reducing the trade barriers in a discriminative way so that the nations can be joined together.
Thus, in simpler terms, it can be said that economic integration is a process where there is an arrangement between two different or more countries where they combine and then form a particularly larger economic region with the help of the process.
There is also a removal of certain discriminations and discontinuities which might exist along the frontiers of the nation. There is a common tariff as well as the trade policies which might work against the countries which are outside the country group.
Let us now have a look upon the types of Economic Integration here and now-
Types of Economic Integration
There are five types of economic integration that you need to pay heed to, so let us have a look upon those-
#1. Free Trade Area
In this, tariff and quantitative trade restrictions are abolished by the member countries. In addition, each member country can separately have their specific trade barriers with the non-member countries. European Free Trade Association is one such example.
#2. Preferential Trade Area or Association
In this type of economic integration, member countries incorporate a practice of offering preferential treatment to other member countries. In the process, they lower tariffs on import from each other. Commonwealth System of Preferences is one such example.
#3. Custom Unions
It is also quite similar to the Free Trade Area type of economic integration excepting the fact that it also has common external tariffs for the non-member countries as well.
Plus, as in the Free Trade Area, members of this economic integration abolish all kinds of tariffs and barriers for each other. European Economic Community is one such example of Custom Unions.
#4. Economic Union
This is the top-rated form of economic integration in which members opt for a common currency and banking system. Members of this type of economic integration have a common market in which they harmonize exchange, fiscal, and monetary rate along with common social, economic, and industrial policies. BENELUX (including Belgium, Netherlands, and Luxembourg) is one such example.
#5. Common Market
It is quite similar to Custom Unions were the abolition of tariffs and barriers for members along with the adoption of common of external tariff occurs, plus it also ensures free movement of labor and capital in the member countries. ECM or European Common Market is an example of Common Market.
After going through the types of Economic Integration, the time has come to delve into the benefits that you will get from these integrations-
Benefits of Economic Integration
Having an economic integration between two different countries can have some important benefits that the people need to know about.
Hence, we are going to have a little discussion about the benefits that might come from economic integration. For those who want to know a little bit more about the benefits of economic integration, this is the best place to find some information about it in detail.
#1. Economies of Scale
For the individual countries out there, having the small and internal market, there is a limited capacity in order to expand production.
With the help of economic integration, there is an offering of having unrestricted access to the different products which are being produced by the member country.
This will also provide a pretty strong inducement in order to expand the production that happens in the country and also it allows the people to completely expand the economies of scale which are present in the country. This is certainly one of the biggest benefits that we can think of.
This is the case for the individual countries out there that need to have some internal markets. However, in the case of internal markets, the production cannot be increased, and hence, the goods are limited as well.
So, economic integration can be a great help in such cases as it aims to provide some access to the countries who want to unify their production markets so that they can provide more goods to the people in the best way and that too without any trouble or hassle.
#2. International Specialization
With the help of economic integration, the member countries will be able to have a bigger degree when it comes to the specialization in the processes and the products which are produced in the country.
The specialization is completely based on the different advantages of the cost comparison and that too by a particular geographical location. So, in a way, it can cause a great production for the member countries.
This is also a very good point when we talk about the benefits that the process of integration can provide the countries which are the members in the best way.
So, there is no doubt that production for some of the member countries will be increased with the help of economic integration.
#3.Qualitative Improvement in Output
Another one of the most important benefits that might come from economic achievement is this one.
There is regional cooperation in the economics of the different countries which can actually lead to several fast changes in the technological aspects and that too in a larger and more efficient scale as well.
This can also ease the capital movements for the country too. If there are such amazing and favorable conditions in the member countries, there can be a very good improvement in the qualitative production which can create better chances of growth for the countries.
Also, the effects will be in a more efficient and faster scale. In such a case, the capital movement in the countries can be improved in the best way with the help of this technique of economic integration.
#4. Expansion of Employment
There are many different countries in the economic integration process, and as these countries organize themselves into the regional economic groups, there will be an unrestricted flow when it comes to the labour of the country and the region as well.
With the different countries practising economic integration in the best way, there is no doubt that it will increase some employment opportunities due to the increase in the labour requirements for sure.
So, there will definitely be an increase in the employment opportunities for the people in the country. This will also lead to an increase in income, as well.
All of these changes will lead to a better economy, which is certainly one of the best things that can come out of economic integration.
Hence, people will have new chances to get jobs in countries that tend to practice economic integration in the best way. That is one of the main reasons why it is so popular amongst the countries these days. There will be more jobs in the production sector of the countries as well.
#5. Trade Improvement
Here we have another benefit that might come from economic integration, and that is definitely one of the best ones for sure. With the help of this process, there will be an increase in the power of bargaining that the member countries might have with the world.
This is also responsible for bringing certain improvements when it comes to trade. As there will be more power for the economic member countries, there is simply not a single speck of doubt about the fact that they will be able to have authority when it comes to the trade between the countries.
#6. Economic Efficiency
There will be more and more competition within the different member countries which are situated in the region. That is all thanks to the economic integration which happens between the countries.
With the help of this process, there will be betterment in the economic efficiency that happens in a particular group, which is certainly very beneficial to the member countries as well.
Wrapping it up!
So, that is all that you need to know about economic integration, and there is no doubt that it is a very important step that can be taken by the countries.
We hope that this article helped you in understanding the concept of economic integration in the best way. How important do you consider economic integration for the effective channelization of international businesses?
Share your views with us in the comments below.