International Economic Integration The modern

Transcript:International Economic Integration The modern:
International Economic Integration The modern industrial system rests upon such techniques that can be employed economically only if the production takes place on a very large scale. This requires expanding markets on the one hand and increasing purchasing power with the people on the other. For the fullest exploitation of the production potential of the modern techniques, certain countries having small internal geographical markets, have attempted to organise themselves into regional groupings. The economic integration, in the broadest sense, means the unification of distinct economies into a single larger economy. Thus the economic integration refers to an arrangement whereby two or more countries combine into a larger economic region through the removal of discontinuities and discriminations existing along national frontiers, while following a common tariff and trade policies against the countries outside the group. There are two essential features of economic integration: (i) Re-introduction of free trade among the member nations. (ii) Imposition of a common external tariff policy against the non-member countries. From these two features, it follows that economic integration is a synthesis between free trade and tariff protection. Benefits of Economic Integration: (i) Economies of Scale: The individual countries, having small internal market, have limited capacity to expand production. The economic integration provides an unrestricted access of the products produced by any member country. This gives strong inducement to expand production and exploit fully the economies of scale. (ii) International Specialisation: The economic integration enables the member countries to attain a greater degree of specialisation in both products and processes. Specialisation based on comparative cost advantage by a specific geographical region can cause considerably large expansion in production. (iii) Qualitative Improvement in Output: The regional economic co-operation among a number of countries leads to rapid technological changes and larger and easier capital movements. The member countries, in such favourable conditions, can bring about qualitative improvement in production. (iv) Expansion of Employment: As some countries organise themselves into regional economic groups and allow unrestricted flow of labour within the region, there can be maximisation of employment and income. (v) Improvement in Terms of Trade: The economic integration greatly increases the bargaining power of the member countries vis-a-vis the rest of the world. That brings about a significant improvement in their terms of trade. (vi) Increase in Economic Efficiency: The economic integration results in increased competition within the region. That helps in maintaining a higher level of economic efficiency