Economic Integration
And Emerging
Market Economic
LEARNING OBJECTIVES
· To review types of economic integration among countries.
· To examine the costs and benefits of economic integration for firms within and outside Europe .
· To understand the European Union (EU) and its implications for firms within and outside Europe .
· To explore the emergence of integration agreements in the Americas, especially the North American Free Trade Agreement (NAFTA), the Southern Cone Common Market (Mercosur), and the Free Trade Area of the Americas (FTAA).
· To review integration developments in Asia , in particular the Asia Pacific Economic Cooperation (APEC) and the Association of Southeast Asian Nations (ASEAN).
· To survey the opportunities for trade offered by emerging market economies.
The benefits of free trade and stable exchange rates are available only if nations are willing to give up some measure of independence and autonomy. This has resulted in increased economic integration around the world with agreements among countries to establish links through movement of goods, services, capital, and labor across borders, Some predict, however, that the regional trading blocs of the new economic world order will divide into a handful of protectionist superstates that, although liberalizing trade among members, may raise barriers to external trade.
Economic integration is best viewed as a spectrum. At one extreme, we might envision a truly global economy in which all countries shared a common currency and agreed to free flows of goods, services, and factors of production. At the other extreme would be a number of closed economies, each independent and self-sufficient. The various integrative agreements in effect today lie along the middle of the spectrum. The most striking example of the promises and pitfalls of integration is the historic economic unification that is taking place in Europe and elsewhere today as discussed in Global Learning Experience 6.1. Some countries, however, give priority to maintaining economic self-sufficiency and independence. Examples of this latter strategy include the policies of North Korea , Vietnam , and Albania
This chapter will begin with an explanation of the various levels of economic integration. Next, major arguments both for and against economic integration will be reviewed. The European Union, the North American Free Trade Agreement, and other economic alliances will be discussed. In the second half of the chapter, the newly emerging market economies will be identified and evaluated in terms of their short-and long term market potential.
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