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What is Economic Integration?
Economic integration is a condition of international trade in which all trade barriers and restrictions are removed. There is perfect capital mobility, complete freedom of migration, complete freedom of establishment of businesses and unhindered flow of information and technology.
As stated above, economic integration is thus a form of international co-operation among some nations to foster mainly, their economic interest,
There are different levels of economic integration as mentioned and discussed below.
Types of Economic Integration
- Monetary Union: Under this system the different currencies of the member countries can be exchanged freely at fixed rates. A monetary union is not in line with economic integration.
- Currency Union: All member countries involved use one currency which is jointly managed by them e.g. The use of CFA Franc by some Francophone West African countries.
- Free Trade Area: All artificial restrictions to trade between the member countries are removed but each country is free to adopt any trade policy it may deem appropriate towards non-member countries.
- Customs Union: The members adopt a common internal and external tariff policy. A part from eliminating all trade barriers between them, they adopt a common tariff agreement towards non-member countries.
- Economic Community (Common Market): In addition to the adoption of a common internal and external tariff policy, there is free mobility of the factors of production between the member states. An economic community also hamionizes development in areas of scientific, social, cultural and economic policies.
- Economic Union: This is a situation of full economic integration. It goes a step further than the Common Market. All economic policies are harmonized; there is free mobility of factors of production and commodities; a common’ internal and extemel tariff structure is adopted. In addition, a common currency is used and monetary fiscal and income policies are harmonized.
Aims and Objectives of Economic Integration
- To promote increased trading activities among the member states.
- To eliminate wasteful competition among the member countries and facilitate greater utilization of excess capacity, leading to a higher productivity.
- To ensure a higher degree of specialization and enc’ourage production according to comparative advantage, leading to higher output and lower production costs.
- To speed up economic development with the economic grouping through joint development efforts and co-operation in various areas of economic activity.
- To provide a more effective from for purposes of collective bargaining with their world countries.
- To provide a large market which would enable heavy industries derive economies of scale and faster economic development.
- To increase the general level of economic welfare of the citizens ofmember states through increased efficiency in production and distribution.