Effects of Regional Economic Integration
Regional economic integration is an agreement among countries in a region to condense and/or eventually eliminate investment and trading barriers to allow a more convenient flow of capital, goods and services. It is an act within countries of the same geographic region to form an alliance and cross the threshold of conformity to boost regional unity and development. The degree of such agreement can virtually draw down its scope to economical (ex., international monetary fund) and political objectives. Apparently there are certain levels of Regional Integration (Free Trade, Customs Union, Common Market, Economic Union and Political Union); such levels will identify the extent of power and obligations of each country to the union.
It has long been in the pages of history whether or not such integration is beneficial to each participating country. However, by example, we see that the effect of such agreement to those regions like EU, NAFTA, ASEAN et al, exercising this kind of practice is, however, undeniably efficient and valuable. We see a handful number of potential benefits from this exercise such as trade benefits, variety of goods and services, political unity, productivity, and other more that develops a better consensus. Regional Economic integration is a major investment in terms of Global Economic strategy. The alliance of participating countries gives each member the advantage of a bigger market size, draw attention of possible investors outside the bloc, and a stronger political stance.
Never the less, with such great advantage comes a great price. The power obtained from this integration limits your access to other non-member nations. In the creation of trade within the borders of regional bloc ignites trade diversion. In the event of a more convenient trade within the bloc, countries tend to cut off outside resources—which later on becomes a threat to global free trade. Countries’ sovereignty and national identity is by some means affected but not completely eliminated. This is the result of a centralized authority that establishes a standard where as members have to comply.
The benefits of economic integration seem to overpower its snags. I guess what concerns me more than the diversion of trade or reduced authority is its implication to business cultural diversity. Most of the time, the establishment of a standard trade practice pulls out a customary way of dealing with a group. This implies that one’s cultural practices may be bypassed due to a standard strategy of dealing within the regional alliance instead of the country alone.