Economic
Integration
The formation of economic integration is designed to address and
enhance the level of competitiveness of member economies in
trade.
Free trade is the primary consideration of regional economic
integrations.
Free Trade Area (FTA) is a trading bloc which
involves the reduction of internal tariffs to zero
of member economies but retaining its different
external affairs.
This policy aims to promote free flow of goods and
services as well as increase the volume of trade within
the region.
However, there are criticisms on FTAs. One of which
includes the unfair trade practice.
Countries that perform well in terms of trade
dominance and its contribution to the regions are
considered winners.
On the other side of the structure,
countries that do not have necessary
materials, logistics, and systems to
compete with , the more and most
powerful countries end up depending
on the benefits of other countries and
become free riders.
The world’s major free trade areas
are ;
North American Free Trade Agreement
(NAFTA),
European Union (EU)
Association of Southeast Asian Nations
(ASEAN)
Common Market of Eastern and Southern
Africa (COMESA)
Southern Common Market/Mercado Comun
del Sur (MERCOSUR).
North American Free Trade
Agreement (NAFTA)
It is a trade agreement signed by Canada,
Mexico, and the United States, aimed at
reducing trade barriers and promoting
economic cooperation between the three
countries.
NAFTA came into effect on January 1, 1994, and
it remained in force until it was replaced by the
United States-Mexico-Canada Agreement
(USMCA), which took effect on July 1, 2020.
European Union (EU)
Is a political and economic union of 27 member states
located primarily in Europe.
It traces its origins to the aftermath of World War II
when European leaders sought to promote peace,
stability, and economic cooperation on the continent.
The EU has since evolved into a unique supranational
organization with a range of powers and
responsibilities.
Association of Southeast Asian
Nations (ASEAN)
It is a regional intergovernmental organization
comprising ten Southeast Asian countries.
Established on August 8, 1967, in Bangkok, Thailand,
ASEAN aims to promote political and economic
cooperation and integration among its member states,
as well as to foster peace, stability, and prosperity in
the Southeast Asian region.
Members: Brunei Darussalam, Cambodia, Indonesia, Laos,
Malaysia, Myanmar (Burma), Philippines, Singapore, Thailand
and Vietnam
Common Market of Eastern and
Southern Africa (COMESA)
It is a regional economic organization established in 1994 to
promote economic integration and cooperation among its
member states.
COMESA aims to create a common market and facilitate the
free movement of goods, services, and factors of production
within the region, with the ultimate goal of enhancing
economic growth and development.
Members (21) : Burundi, Comoros, Democratic Republic of the
Congo, Djibouti, Egypt, Eswatini (formerly Swaziland), Ethiopia,
Kenya, Libya, Madagascar, Malawi, Mauritius, Rwanda,
Seychelles, Somalia, Sudan, South Sudan, Tanzania, Uganda,
Zambia and Zimbabwe
Southern Common Market or
Mercado Comun del Sur
(MERCOSUR).
The Southern Common Market, known as Mercado
Comun del Sur (MERCOSUR) in Spanish, is a regional
economic and political bloc established in 1991 by
Argentina, Brazil, Paraguay, and Uruguay. Its primary
objectives are to promote economic integration, foster
trade and investment, and enhance political
cooperation among its member states.
2.5
International
Financial
Institution
The Bretton-Woods
System
After the two world wars, world leaders sought to create a
global economic system that would ensure a longer-lasting
global peace.
They believed that one of the ways to achieve this goal was
to set up a network of global financial institutions that would
promote economic interdependence and prosperity.
The Bretton-Woods system was inaugurated in 1944 during
the United Nations Monetary and Financial Conference to
prevent the catastrophes of the early decades of the century
from reoccurring and affecting international ties.
The Bretton Woods system was largely
influenced by the ideas of British economist
John Maynard Keynes who believed that
economic crisis occurs not when a country
does not have enough money, but when
money is not being spent and thereby, not
moving.
When economies slow down, according to
Keynes, governments must reinvigorate
markets with infusions of capital.
Delegates at Bretton-Woods agreed to create two financial
institutions:
The first was the International Bank for Reconstruction and
Development (IBRD) to be responsible for funding post war
reconstruction projects. It was a critical institution at a time
when many of the world’s cities had been destroyed by the
war.
The second institution was the International Monetary Fund
(IMF), which was to be global lender of last resort to prevent
individual countries from spiraling into credit crises. If
economic growth in a country slowed down because there
was not enough money to stimulate the economy, the IMF
would step in
International Financial Institutions
International Financial Institutions are
international non-profit agencies, one of the
major sources of financing like regional
development banks or banks globally.
Major role is to finance productive
development projects or to promote
economic development.
IFIs focus on long-term investment projects,
institution-building, and on social,
environmental, and poverty issues,
strengthen economic governance, ensuring
the stability of international financial system,
and trade liberalization.
IFIs achieve these objectives through loans,
credits, and grants to national governments.
Such funding is usually tied to specific
projects that focus on economic and socially
sustainable development.
WORLD BANK
The World Bank promotes long-term
economic development and poverty
reduction by providing technical and financial
support to help countries reform certain
sectors or implement specific projects - such
as building schools and health centers,
providing water and electricity, fighting
disease, and protecting the environment.
International Monetary
Fund (IMF)
International Monetary Fund (IMF)
is responsible in supervising
exchange rate system, providing
loan programs to economies
experiencing balance of payments
adjustments, and review domestic
monetary policies.
IMF is keen in monitoring foreign
monetary transactions as it has a
direct effect on a country’s
financial climate.
Asian Development Bank
(ADB)
The Asian Development Bank is a
multilateral development bank
dedicated to reducing poverty in the
Asia-Pacific region by means of
sustainable economic growth, social
development, and good governance.
The ADB’s main financial
instruments are loans, technical
assistance, and grants. Most lending
is in the public sector, primarily for
large infrastructure projects.
2.6
GLOBAL/
TRANSNATIONAL
CORPORATIONS
As the global economy is becoming complex and competitive,
Multinational Corporations continue to offer innovations, new
products, and services.
For several years, the term Multinational Corporations was used to
describe a firm operating in different countries around the world.
Because of the magnitude of global production and networks, the
term Transnational Corporations became the more acceptable
name.
This refers to business organizations and firms that compete in
regional or global markets. It operates in countries and makes
investments in research, technology, facilities, distribution, and
production. TNC can control and monopolize the global market
especially if it has a huge pool of resources.
Attributes of Global Corporations
1. Very high assets and turnover – the business must be
large and must own a huge amount of assets, both
physical and financial and they are able to generate
substantial profits.
2. Network of branches – global corporations maintain
production and marketing operations in different
countries.
3. Control – the management of offices in other countries
is controlled by one head office located in the home
country. Therefore, the source of command is found in
the home country.
4. Continued growth – even as they operate in other countries,
they strive to grow their economic size by constantly
upgrading and by conducting mergers and acquisitions.
5. Sophisticated technology – to achieve substantial growth,
they need to make use of capital-intensive technology,
especially in their production and marketing activities.
6. Right skills – global corporations aim to employ only the best
managers, those who are capable of handling large amounts of
funds, using advanced technology, managing workers, and
running a huge business entity.
7. Good quality products – because they use capital-intensive
technology, they can produce top-of-the-line products
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