International Buisness Management

TE2, September 8th, 2011

Chapter 8, continued:

The Case For Regional Integration: There are both economic and political arguments in favor of integration. Such integration is, however, difficult to achieve due to resistance from many groups within countries involved. Today we will begin to look at the cases for integration. We will take a look at the arguments against integration in the next class.

The Economic Case for Integration: The theoretical idea here is for an absence of barriers to the free flow of goods, services and factors of production between nations. Regional integration can be seen as an attempt to achieve more gains from such a free flow of goods and services than could be obtained under the WTO. Its easier to reach consensus with a limited number of countries, such as a regional integration deal entails than it is with a large number of players, such at the more than 150 nations who are currently members of the WTO.

The Political Case for Integration: Making neighboring countries more dependent upon one another creates incentives for political cooperation and reduces the chance of violent conflict. By grouping their economies together, nations can increase their political clout on the world stage. We can see these factors at play with the integration of the nations of Europe into the European Community in 1957, following World War II.

* By uniting their economies, nations of Europe sought to reduce or eliminate the likelihood of war among European Nations.

* European Nations also felt that in order to compete with the now massive power of the United States and the Soviet Union

The Case Against Economic Integration: We mentioned in the last class that there has been a strong trend toward regional economic integration over the past 20 years. According to the text, some economists feel that the benefits of regional economic integration have been overemphasized while the costs have been kind of swept under the rug. These economists...