Market Integration Flashcards
(35 cards)
This occurs when firms within the same industry
Horizontal Integration
Supply chain come together
Vertical Integration
This occurs at the International level.
Global or cross border integration
contries within a specific region reduce trade barriers
Regional market integration
agreement grant each other preferential access to
certain products by lowering tariffs or providing other favorable terms
Preferential trade Area (PTA)
Member countries eliminate tariffs and quotas on trade between them, but they
maintain independent trade policies with non-members
Free trade Area
In addition to eliminating tariffs between member states, countries in a customs union
adopt a common external tariff for non-members. An example is the Southern African Customs Union
(SACU).
Custom union
goes beyond a customs union by allowing not only the free flow of
goods but also services, capital, and labor across member countries. The European Economic Area (EEA) is
an example.
common market
countries integrate their economies to the extent of harmonizing
fiscal and monetary policies.
economic union
This is the final stage, where countries merge their economies completely,
often adopting a single currency, unified regulatory framework, and centralized economic policies.
Full economic integration
Integration promotes competition by eliminating barriers,
encouraging firms to become more efficient, and leading to better resource allocation across markets
Increased Efficiency and competition
Companies can access a larger market, which enables them to
achieve economies of scale, reduce production costs, and enhance innovation.
Larger market and economies of scale
Integrated markets often attract more foreign direct investment (FDI) because
investors are drawn to more stable, transparent, and open markets.
Investment Opportunities
Consumers benefit from access to a wider range of goods and services, often
at lower prices due to increased competition.
Greater consumer choice
Market integration often drives economic growth as a result of trade expansion,
innovation, and investment. Integrated markets help countries specialize in industries where they have a
comparative advantage.
faster economic growth
As countries integrate their markets, they may need to cede control over certain
national policies, such as trade and monetary policy, which can be politically sensitive.
Loss of sovereignty
While integration boosts overall economic performance, the benefits may not be
distributed equally among all participating countries or regions, leading to potential imbalances in
development.
Unequal benefits
As markets become more integrated, some industries may suffer from increased
foreign competition, leading to job losses, firm closures, or the need for retraining.
Adjustment costs
For markets to integrate fully, regulatory systems and standards (such as labor
laws, environmental standards, and health and safety rules) must be harmonized, which can be a difficult
and time-consuming process.
Regulatory harmonization
Integrated markets lead to greater interdependence, meaning that economic
disruptions in one country can affect the entire integrated region, as seen in the 2008 global financial
crisis.
Economic dependency
- one of the most advanced examples of market integration. It has
eliminated most trade barriers, established a common market, and introduced a single currency (the euro)
for many member states. - allows free movement of goods, services, capital, and
labor across member countries.
European Union(EU)
Working toward regional economic integration
with the AEC, which aims to create a single market and production base for its 10 member states by
reducing trade barriers and improving investment conditions.
ASEAN economic community
This South American customs union, including countries like
Brazil, Argentina, Uruguay, and Paraguay, seeks to promote free trade and fluid movement of goods,
people, and improving investment conditions
mercosur ( Southern Common market )
This agreement, which replaced NAFTA, facilitates
trade and investment among the three North American countries, though it does not go as far as customs
unions or common markets in terms of integration.
United States Mexico Canada Agreement
