Market Integration: The Contemporary World

MA RKET

INTEG RATION
THE CONTEMPORARY WORLD

BY: KARLA MAE D. OLVIS

WHAT IS MARKET INTEGRATION?
• A SITUATION IN WHICH SEPARATE MARKETS FOR THE
SAME PRODUCT BECOME ONE SINGLE MARKET.
• A STATE OF AFFAIRS OR A PROCESS INVOLVING ATTEMPTS TO

COMBINE SEPARATE NATIONAL ECONOMIES INTO LARGER
ECONOMIC REGIONS
BRIEF HISTORY
• THE INTERNATIONAL ECONOMIC INTEGRATION WAS
UNRAVELD DURING THE WORLD WAR AND THE GREAT
DEPRESSION.
• WORLD WAR 1 BROUGHT THE LIBERAL ECONOMIC

ORDER OF THE LATE 19TH CENTURY TO AN ABRUPT END.
• EXPORT RATIOS ROSE IN NEUTRAL ECONOMIES SUCH AS

SWEDEN, JAPAN AND NORTH AMERICA WHERE GRAIN
PRODUCTION EXPANDED SHARPLY DURING THE WAR
YEARS TO MEET ALLIED DEMAND
BRIEF HISTORY (CONT.)
• THE ABSENCE OF EUROPEAN MANUFACTURED EXPORTS
ON WORLD MARKETS STIMULATED THE EXPANSION OF
INDUSTRIAL CAPACITY
• THE END OF WAR DID NOT IMPLY AN END TO

PROTECTION. DIFFERENT TARIFF ACTS AND
RESTRICTIONS WERE MADE.
• THE GREAT DEPRESSION WAS A MAJOR REASON FOR THE

ADOPTION OF SEVERE PROTECTION
BRIEF HISTORY (CONT.)
• IN 1932, THERE WERE COUNTRIES TRYING TO MODERATE
AND REVERSE THE INCREASE IN PROTECTIONISM OF THE
PREVIOUS YEAR OR TWO.
• POST WAR ECONOMIC REINTEGRATION WAS SUPPORTED

BY SEVERAL FACTORS BOTH TECHNOLOGICAL AND
POLITICAL
INTERNATIONAL FINANCIAL INSTITUTIONS (IFI S )
• are international financial organizations which

multiple nations founded.
• such organizations are subject to international laws
of any one single country
• usually owned by national governments of the
founding members
EXAMPLES OF IFIs
• EUROPEAN INVESTMENT BANK
– LARGEST INTERNATIONAL FINANCIAL INSTITUTION WITH A
BALANCE SHEET RECORDED IN THE YEAR 2013 AMOUNTING TO
512 BILLION EUROS.
• WORLD BANK
– FOCUSES ON DEVELOPING THE ECONOMIES AND REDUCING
THE POVERTY OF MEMBER STATES OVER THE LONGER TERM
– THEY OFFER FINANCIAL AND TECHNICAL ASSISTANCE TO AID
COUNTRIES WHICH ARE TRYING TO REFORM SECTIONS OF
THEIR ECONOMIES
EXAMPLES OF IFIs (CONT.)
• INTERNATIONAL MONETARY FUND (IMF)
– CONCENTRATES ITS EFFORTS IN MACROECONOMIC ISSUES.
– OPERATES UNDER A MANDATE TO FOSTER MONETARY

COOPERATION ON AN INTERNATIONAL LEVEL
– IT OFFERS TECHICAL ASSISTANCE AND POLICY TO ADVICE

COUNTRIES TO DEVELOP AND KEEP MORE PROSPEROUS AND
STRONGER ECONOMIES
EXAMPLES OF IFIs (CONT.)
• BOTH WORLD BANK AND INTERNATIONAL
MONETARY FUND ARE FOUNDED UNDER THE
BRETTON WOODS AGREEMENT IN 1944
• THEIR GOAL IS IMPROVING THE STANDARDS OF

LIVING IN THEIR RESPECTIVE MEMBER NATIONS
TYPES OF MARKET INTEGRATION
1. NEGATIVE INTEGRATION
2. POSITIVE INTEGRATION
NEGATIVE INTEGRATION
• REDUCES NON-TARIFFS AND TARIFF
BARIERS TO TRADE AS A MAIN TOOL
FOR INTEGRATIING MARKETS
POSITIVE INTEGRATION
• ADJUSTS DOMESTIC POLICIES AND
INSTITUTIONS THROUGH THE
CREATION OF SUPRANATIONAL
ARRANGEMENTS.
SUPRANATIONAL ARRANGEMENTS
• IS A TYPE OF MULTINATIONAL POLITICAL UNION
WHERE NEGOTIATED POWER IS DELEGATED TO
AN AUTHORITY BY GOVERNMENTS OF MEMBER
STATES.
• THE GOVERNMENT OF GOVERNMENTS

FORMS OF INTEGRATION
1. PREFERENTIAL AGREEMENT
2. FREE TRADE AREA
3. CUSTOMS UNION
4. COMMON MARKETS
5. ECONOMIC UNION
PREFERENTIAL AGREEMENT
• INVOLVES LOWER TRADE BARRIERS
BETWEEN THOSE COUNTRIES WHICH HAVE
SIGNED THE AGREEMENT
• EXAMPLES:
(1)NORTH AMERICAN FREE TRADE AGREEMENT
(2)THE ASEAN FREE TRADE AREA
FREE TRADE AREA
• REDUCES BARRIERS TO TRADE AMONG
MEMBER COUNTRIES TO ZERO BUT EACH
MEMBER COUNTRY STILL HAS AUTONOMY IN
DECIDING THE EXTERNAL RATE OF TARIFF FOR
ITS TRADE WITH NON-MEMBER COUNTRIES.
• EXAMPLE: EUROPEAN FREE TRADE AREA (EFTA)

CUSTOMS UNION
• IN THIS FORM, COUNTRIES AGREE TO ABOLISH
TARIFF AND NON-TARIFF BARRIERS TO TRADE
IN GOODS FLOWING BETWEEN THEM
• EXAMPLE: EUROPEAN UNION

COMMON MARKETS
• ALLOWS FOR FREE MOVEMENT OF LABOR
AND CAPITAL WITHIN THE MEMBER
COUNTRIES.
• EXAMPLE: EUROPEAN COMMON MARKET

ECONOMIC UNION
• IS THE HIGHEST FORM OF ECONOMIC
INTEGRATION
• EXAMPLE: EUROPEAN UNION (EU)

END
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MA RKET

BY: KARLA MAE D. OLVIS

• A STATE OF AFFAIRS OR A PROCESS INVOLVING ATTEMPTS TO

• WORLD WAR 1 BROUGHT THE LIBERAL ECONOMIC

• EXPORT RATIOS ROSE IN NEUTRAL ECONOMIES SUCH AS

• THE END OF WAR DID NOT IMPLY AN END TO

• THE GREAT DEPRESSION WAS A MAJOR REASON FOR THE

• POST WAR ECONOMIC REINTEGRATION WAS SUPPORTED

• are international financial organizations which

– OPERATES UNDER A MANDATE TO FOSTER MONETARY

– IT OFFERS TECHICAL ASSISTANCE AND POLICY TO ADVICE

• THEIR GOAL IS IMPROVING THE STANDARDS OF

• THE GOVERNMENT OF GOVERNMENTS

• EXAMPLE: EUROPEAN FREE TRADE AREA (EFTA)

• EXAMPLE: EUROPEAN UNION

• EXAMPLE: EUROPEAN COMMON MARKET

• EXAMPLE: EUROPEAN UNION (EU)

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