The Theory of Economic Integration

Abstract

The term economic integration does not have a single meaning. It is used to describe interdependence among national economies which are engaged in international trade. It also refers to any group of national economies which are fully unified in an economic sense. Economic integration may be understood as a process leading to the complete abolition of all discrimination between economic units belonging to different national economies, or as a stage in such a process. Seen as a stage, this process is often confused with the various forms of economic integration. Before we began examining these different forms of integration let us note that there are also other terms used to describe economic integration whose main defining characteristic is geographically-discriminating trade policy. Some of the most frequently used terms include regional trading arrangements (RTAs), regional integration agreements (RIAs), trading blocs, regionalism, preferential trading arrangements (PTAs), regional trade liberalisation, and preferential tariff reduction. Even though these terms do not have identical meanings they are used interchangeably to refer to both the process and the state of affairs known as economic integration. In fact these terms predominate in the renewed debate over the virtues of multilateral trade liberalisation. While integrative processes used to be seen as implying that economic integration would lead towards multilateral trade liberalisation, nowadays we tend to see regionalism as being a threat to the multilateral trade liberalisation which has evolved through the GATT in the post-war period. We will discuss this issue in Chapter 17.