Economic Integration

Published Mar 26, 2023

Definition of Economic Integration

Economic integration refers to the process of countries and regions coming together to promote economic cooperation by reducing trade barriers and increasing the flow of goods, services, people, and capital across borders. This process may involve the formation of trade blocs, customs unions, or even a single market.

Example

Perhaps the most well-known example of economic integration is the European Union (EU), which evolved from the European Coal and Steel Community created in 1951. The EU is a customs union with 27 member countries that have agreed to eliminate tariffs on trade among themselves and to apply a common tariff on imports from non-member countries. Additionally, the EU has created a single market that allows for free movement of goods, services, people, and capital within the bloc.

By removing trade barriers, the EU has created a larger market with more opportunities for businesses and consumers. For example, a French company can sell its products to a much larger customer base than just its domestic market. Similarly, the average EU citizen has access to a wider range of products and services at lower prices.

Why Economic Integration Matters

Economic integration has several benefits for participating countries. It can lead to greater efficiency, increased competition, and lower prices for consumers by promoting the free flow of goods, services, people, and capital across borders. It may also create jobs and increase economic growth. Additionally, economic integration can build greater political and social ties between countries, leading to greater stability and cooperation.

However, critics argue that economic integration can also have negative impacts, such as job losses in certain industries and threats to national sovereignty. Therefore, policymakers must carefully consider the benefits and risks before pursuing this type of integration.