Disadvantages of economic integration

Learn the effects of trade creation and trade diversion.

Disadvantages of economic integration

Regions have found it difficult to address the equitable distribution of gains and losses from integration. Mechanisms to provide compensation to the less developed members of groupings have been either absent or ineffective.

The dependence of many African countries on their former colonial powers tended to work against viable regional groupings.

Regionalism has been driven from above by public sector organizations and has lacked the support and involvement of the private sector and the general public. Cooperation has been seen as involving bloated and expensive bureaucracies, rather than opportunities for growth and development.

Disadvantages of economic integration

Institutional weaknesses, including the Disadvantages of economic integration of too many regional organizations, a tendency towards top-heavy structures with too many political appointments, failures by governments to meet their financial obligations to regional organizations, poor preparation before meetings, and lack of follow up by sectoral ministries on decisions taken at regional meetings by Heads of State.

Integration is hampered by the existence of weak states and political opposition to sharing sovereignty. Integration arrangements are not characterized by strong supranational bodies and virtually all integration institutions are intergovernmental. Given the ongoing economic reform programs in these countries, the underlying premise is that regional integration can accelerate the pace of economic growth by fostering efficient cross-border investment and trade flows.

Assessments by the co-sponsors suggested that good if variable progress has been achieved by the Initiative and that the model represents an effective example of regional partnership Fajgenbaum et al, Trade relations, which are now based on non-reciprocal trade preferences granted by the EU, will in future be based on economic integration agreements.

Disadvantages of economic integration

Formal negotiations of EPAs started in September in a two-phase process. The first phase of the negotiations takes place between the EU and the ACP group as a whole with the aim of defining the format, structure and principles for the negotiations, to be followed by the negotiation of individual EPAs.

It is envisaged that EPAs will enter into force by 1 January at the latest. Decisions about the geographical configuration of future EPAs are still outstanding.

Under the Cotonou Agreement, this decision lies with the ACP countries, but the EU has added the rider that it is up to the Community to ensure that this decision is in line with the objectives and principles of the Agreement. Criteria for ACP regions The criteria for eligible regions are clear enough; the difficulty lies in implementing them in the specific context of the existing structure of African regional groupings.

It highlights the importance of structural funds financed by customs and taxation revenues to assist weaker partners in the integration scheme to ensure an equitable distribution of the gains of regional integration.

Finally, it recommends that integration should take account of existing infrastructures, trading and production links. This requirement runs up against the overlapping membership and fragmented nature of African regional organizations.

There are a number of permutations. The simplest is where one grouping is a sub-group of another, possibly embarked on pursuing deeper integration as an example of variable geometry.

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An example typical in West and Southern Africa is where there is a wide free trade area arrangement, within which a sub-group has established a customs union or an even more deeply integrated group.

Here the options are for the negotiations to proceed with either one group or the other as it would be impossible to have two negotiations in parallel, one with respect to the free trade area and one with the customs union.

The difficulty is that if negotiations proceed with the customs union sub-group, it is hard to see how this could avoid fragmenting the larger grouping unless it decides to accelerate its own integration ambitions. More tricky situations arise with groupings that have members in common.

In this situation, overlapping membership would lead to the negotiation of two or more EPAs with the same countries, which is not conceivable.

Robert J. Barro and Jong-Wha Lee

As overlapping memberships mainly affect the broad, free trade groupings, this could effectively end up forcing even larger integration arrangements than currently exist. Another difficult situation is where groupings have non-ACP States as members.

The Commission points out that while, legally, arrangements could be put in place to allow free circulation of goods within the free trade area while confining the benefits of the EPA to the ACP members of the group, in practice this situation would not be tenable in the longer term because of the possibility of trade deflection.

Given that the EU will have entered into separate FTAs with many of these non-ACP African states, it suggests that a logical step would be to extend the geographical coverage of EPAs by merging the existing agreements.

While this might imply that only the former are required to provide some measure of reciprocity under the new regime, in practice it is hard to see how LDCs which are members of regional groupings with non-LDC ACP States can retain external protection against EU imports.

It goes on to suggest that the appropriate response for LDCs in a regional grouping is to adopt a variable speed approach under which they would be offered a delayed start or a slower pace of tariff dismantlement.The disadvantages of regional integration include limited fiscal capabilities, cultural centralization, creation of trading blocs, diversion of trade and surrendering some degree of sovereignty.

Regional integration refers to various economic and political agreements that . 11 Advantages and Disadvantages of the European Union The European Union, also known as just the EU, is a union of 28 countries that work together in political and economic matters.

The majority of the union member countries are located in Europe with a handful located in Russia. Proposed method of computing the GDP after economic integration enables to compute the benefits of economic integration for member states on the union: one needs to know the rates of domestic.

THE IMPEDIMENTS OF ECONOMIC INTEGRATION IN AFRICAN ECONOMIES NARKMANEE THITIKARN 20TH MARCH, THE IMPEDIMENTS OF ECONOMIC INTEGRATION IN AFRICAN ECONOMIES Introduction Economic integration is an economic agreement between regions characterized by removal or reduct ion or barriers to trade and harmonization of fiscal and monetary .

ECONOMIC INTEGRATION IN THE BALKANS French was the largest and the most successflil, met in Geneva where they drafted a declaration calling for a federal Europe after the war. Nov 04,  · The Pros and Cons of Free Trade Areas. Posted on November 4, Updated on November 4, Many Africans are of the opinion that greater economic integration of the continent through Free Trade Areas will be of benefit to the continent’s growth.

Economic integration