Regional integration and economic blocs
Under regional economic integration, groups of countries form alliances to promote free trade, cross-national investment, and other mutual goals. This integration results from regional economic integration blocs (or economic blocs), in which member countries agree to eliminate tariffs and other restrictions on cross-national commerce. At minimum, the countries in an economic bloc become parties to a free trade agreement, which eliminates tariffs, quotas, and other trade barriers. The stages of regional integration include the free trade area, the customs union, the common market, and the economic union.
The leading economic blocs
There are hundreds of economic integration agreements in the world. The European Union (EU) is the most advanced. It has increased market access, improved trade rules, and harmonized standards among its members. The North American Free Trade Agreement (NAFTA) consists of Canada, Mexico, and the United States. Other blocs are prominent worldwide and have achieved varying degrees of success.
Advantages and implications of regional integration
Regional integration contributes to corporate and industrial growth and hence to economic growth, better living standards, and higher tax revenues for the member countries. It increases market size by integrating the economies within a region. It increases economies of scale and factor productivity among firms in the member countries and attracts foreign investors to the bloc. Regional integration leads to increased internationalization by firms inside their economic bloc. Firms restructure their operations. Managers revise marketing strategies by standardizing products.