trade integration

trade integration

the establishment of FREE TRADE between a number of countries with the aim of securing the benefits of international SPECIALIZATION and INTERNATIONAL TRADE. There are four main forms of trade integration, ranging from a loose association of trade partners to a fully integrated group of nation states:

1. a FREE TRADE AREA, where members eliminate trade barriers between themselves but each continues to operate its own particular barriers against nonmembers.
2. a CUSTOMS UNION, where members eliminate trade barriers between themselves and establish uniform barriers against nonmembers, in particular a common external tariff.
3. a COMMON MARKET, that is, a customs union that also provides for the free movement of labour and capital across national boundaries.
4. an ECONOMIC UNION, that is, a common market that also provides for the unification of members' general objectives in respect of economic growth, etc, and the harmonization of monetary, fiscal and other policies.

Examples of ‘free trade areas’ are the EUROPEAN FREE TRADE ASSOCIATION (EFTA), the NORTH AMERICAN FREE TRADE AGREEMENT (NAFTA), the ASSOCIATION OF SOUTHEAST ASIAN NATIONS (ASEAN), ASIA PACIFIC ECONOMIC COOPERATION (APEC), and the former LATIN AMERICAN FREE TRADE ASSOCIATION (LAFTA). A splinter-group from LAFTA, MERCOSUR, is an example of a ‘customs union’; the ANDEAN PACT, another LAFTA splinter-group, is an example of a ‘common market’; while the EUROPEAN UNION is rapidly transforming itself from a common market into a full-blown economic union' (see ECONOMIC AND MONETARY UNION).

Partial trade integration as exemplified by the above arrangements are beneficial insofar as they create additional trade between members, but they also involve discrimination against nonmembers, which may reduce trade with these countries. Thus, many economists view the promotion of free trade on a multilateral basis through the auspices of the WORLD TRADE ORGANIZATION as generally preferable to limited regional alliances.

Collins Dictionary of Business, 3rd ed. © 2002, 2005 C Pass, B Lowes, A Pendleton, L Chadwick, D O’Reilly and M Afferson

trade integration

the establishment of FREE TRADE between a number of countries with the aim of securing the benefits of international SPECIALIZATION and INTERNATIONAL TRADE. There are four main forms of trade integration, ranging from a loose association of trade partners to a fully integrated group of nation states:

1. a FREE TRADE AREA, where members eliminate trade barriers between themselves but each continues to operate its own particular barriers against nonmembers;
2. a CUSTOMS UNION, where members eliminate trade barriers between themselves

   and establish uniform barriers against nonmembers, in particular a common external tariff;

3. a COMMON MARKET, that is, a customs union that also provides for the free movement of labour and capital across national boundaries;
4. an ECONOMIC UNION, that is, a common market that also provides for the unification of members’ general objectives in respect of economic growth, etc., and the harmonization of monetary, fiscal and other policies.

Examples of‘free trade areas’ are the EUROPEAN FREE TRADE ASSOCIATION (EFTA), the NORTH AMERICAN FREE TRADE AGREEMENT (NAFTA), the ASSOCIATION OF SOUTHEAST ASIAN NATIONS (ASEAN), ASIA PACIFIC ECONOMIC COOPERATION (APEC), and the former LATIN AMERICAN FREE TRADE ASSOCIATION (LAFTA). A splinter-group from LAFTA, MERCOSUR, is an example of a customs union, the ANDEAN PACT, another LAFTA splinter-group, is an example of a common market, while the EUROPEAN UNION is rapidly transforming itself from a common market into a full-blown economic union (see ECONOMIC AND MONETARY UNION). Partial trade integrations as exemplified by the above arrangements are beneficial insofar as they create additional trade between members (see TRADE CREATION), but they also involve discrimination against nonmembers, which may reduce trade with these countries (see TRADE DIVERSION).Thus, many economists view the promotion of free trade on a multilateral basis through the auspices of the WORLD TRADE ORGANIZATION as generally preferable to limited regional alliances. See also GAINS FROM TRADE.

Collins Dictionary of Economics, 4th ed. © C. Pass, B. Lowes, L. Davies 2005