Theory of Economic Integration

Theory of Economic Integration Descriptive background Katarzyna Śledziewska [email protected] www.wne.uw.edu.pl/~sledziewska What is economic ...
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Theory of Economic Integration Descriptive background Katarzyna Śledziewska [email protected] www.wne.uw.edu.pl/~sledziewska

What is economic integration? What is regionalism? • Definition and significance

International economic integration • Complex notion which must be defined with care • Does not have a clear-cut meaning for all economists • Definitions are often vague – Mess – Process or stage?

International economic integration • Pinder (1969) – Combination of parts into the whole. • Union is a outcome of the combination of these parts or members

– A process towards union – Removal of discrimination between economic agents of the member countries

• Kahnert te al.. (1969) – Process of the progressive removal of discrimination that exists along national borders

• Mennis and Sauvant (1976) – Process whereby boundaries between nation-states become less discontinuous, thereby leading to the formation of more comprehensive systems.

International economic integration • Pelkmans (1984) – Elimination of economic frontiers between two or more economies. – Economic frontier • A demarcation line across which the mobility of goods, services and factors is relatively low.

• Balassa (1973) – Process – the removal of discrimination between different states – State of affairs – the absence of different forms of discrimination

• Swann (1996) – Process or state of affairs that involves the combination of previously separate economies into larger arrangements

International economic integration • Molle (1991) – Prograssive elimination of economic frontiers between countries – This progress is gradual

• El-Agraa (1985) – Discriminatory removal of all trade impediments between participating nations and the establishment of certain elements of coordination between them

International economic integration • Tinbergen (1954) – Negative integration – removal of discriminatory and restrictive institutions and the introduction of freedom for economic transactions – Positive integration – the adjustment of existing and the establishment of new policies and institutions endowed with coercive powers

• Economic integration Goode (2003) – All economies, except those practicing autarky, are to some extent integrated • The term usually reserved for groups of economies that are manifestly combining their activities more quickly among themselves than with others – Market-led integration – spontaneous integration without the formal involvement of governments – Policy-led integration – integration through intergovernmental frameworks

Regionalism • Bhagwati (1999) – Preferential trade agreements among a subset of nations

• Goode (2003) – actions by governments to liberalize or facilitate trade on regional basis – offers a quicker way to achieve results for the participating economies than the full multilateral process

• Regional integration arrangement RIA Goode (2003) – bilateral or regional economic agreement

– seeks to achieve a degree of economic integration

• Regional trade arrangement RTA Goode (2003) – FTA, CU CM

International economic integration • Economic integration agreements Goode (2003) – Cover free-trade arrangements in services • Free trade in services requires the possibility of commercial presence in the importing country as well as the free movement of consumers and producers of services • Involves greater degree of economic integration

Regionalism - WTO context • More general – RTAs (regional trade agreements) may be agreements concluded between countries not necessarily belonging to the same geographical region; • EU and Turkey – no consesus exists on either geographical or cultural criteria

• More specific – the WTO provisions which relate specifically to conditions of preferential trade liberalization with RTAs http://www.wto.org/english/tratop_e/region_e/region_e.htm

Regionalism • “Regionalism is in fashion. • It seems that every month brings news of yet another agreement among a group of countries, or between one group and another, to strength their economic links, particularly by removing barriers to trade and investment among themselves”. • Frankel (1997)

Evolution of Regional Trade Agreements in the world, 1948-2009 • WTO members – are bound to notify RTAs in which they participate – all of them have notified participation in one or more RTAs (some are party to 20 or more)

• Notifications of RTAs – May refer to • New agreement • the accession of new parties to an agreement that already exists

– In the period 1948-1994 → 123 notifications – Since 1995 → over 300

Evolution of Regional Trade Agreements in the world, 1948-2009

Average number of PTA participants per WTO member, 1958-2010, notified PTAs

Map of RTAs by country, participation in Regional Trade Agreements for goods and services

Mongolia

Mauritania

Somalia

A hierarchy of regional economic arrangements

Free trade area

Common Customs market union

Economic union