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Regional Economic Integration:The Theoretical Reason Countries agreeing to come together (collaborate) to form regional economic development agreements WHY? Regional Free Trade Modern day push: The Governments of many countries, including USA , advocate for Milton Friedman’s principles of capitalism and freedom in their trade policies: http://www.youtube.com/watch?v=RWsx1X8PV_A • Economic Philosophies of • Adam Smith & David Ricardo • Absolute & Comparative Advantage: • Greater production efficiencies • Trade liberalism Free trade • Greater competition
How – collaboration at what levels? Bilateral integration across 2 countries Multilateral integration across >2 countries Regional integration within a cohort of countries Multi-regional integration within a cohorts of regions International integration across regions and/or countries Within each integration configuration there is also the focus of integration one or more parts of the economy system 1
Advantages & Disadvantages Economic benefits – eg access to larger markets Political benefits – eg better inter-country relationships Social/culture integration Better globalisation capacity Strong united voice in international matters Peace & unity Free from manipulated protectionism Marginalising small groups National / homeland security risks Trade diversion by stronger countries under the disguise of trade creation Cost-benefit threshold conditional – benefits come only when trade created > trade diverted Reality Bites Have advantages materialise & sustainable for everyone? Have disadvantaged experiences been effectively prevented, mitigated or recovered?
How – delivery dimensions? Location Based Free Trade Areas Eg: European Free Trade Assoc (EFTA); North America Free Trade Agreement (NAFTA) Facilitated by Customs Union Eg: Andean community – Bolivia, Columbia, Ecuador & Peru Aims for Facilitated by Economic Union Eg: European Union Common Markets Eg: MERCOSUR – Brazil, Argentina, Paraguay & Uruguay Facilitated by Political Union Eg: European Union Assignment 1 asks is this framework working?
NAFTA – Strategic Outcomes US Canada Mexico Help Mexico growth Getting cheaper goods from Mexico Higher capacity to compete with Asian & European rivals Tut Question 1 Guide
EU – Strategic Outcomes Single Market Single Currency Location efficiency & specialisation (cheaper production goods & services) No trade & FX barriers between countries (less cross border costs) Efficiency Advantage Higher Global Competition Capacity Tut Question 2 Guide
Australian & ASEAN strategic positioning ASEAN Others Question Only exporting? Or should be more FDI to increase Australia’s global competitiveness? Global Competition ANZCERTA EU NAFTA Tut Question 3 Guide
NAFTA Case Study No border inspection for Trucks save time & $ Who benefits most? Mexican Truckers Why?
NAFTA Case Study Economic & Social Impact Loss of Businesses & Jobs Reduction in income & wages Safety standards compromise Homeland security risks Economic Justification Time saving Costs saving
NAFTA Case Study 1994 NAFTA setup S11 Incident homeland security priority US Safety & Environment Standards breaches tariff conditions Now homeland security Standards can also compromise NAFTA agreement Has rights to retaliate against NAFTA agreements
As exemplified by the European Union (EU), regional economic integration is replete with political, economic & cultural danger. Discuss through the use of valid, real-life examples. Assignment 1
Why is Economic Integration Working or Not Working? OUTSIDE The EI Consortium Organisation eg EU Who are the stakeholders? What are the systematic structures & processes? What are the business environmental drivers? Lessons learnt for EU? EU What interacting roles? Effectiveness of Roles? EFTA Which works better? Why? INSIDE The EI Consortium Organisation Who are the decision makers? What are the common goals? What have been achieved so far? What is the governance framework? What are its internal strengths & Weaknesses? NAFTA ANZCERTA ASEAN
Additional Search Words Inter-country collaboration International collaboration What other search terms? Success Drivers Case Studies’ Evidence Issues Case Studies’ Evidence Apply to EU case?