Integration in the Americas & Beyond I. Economic Integration Terminology



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Integration in the Americas & Beyond

I. Economic Integration Terminology

II. Issues in Regional Integration

III. The Evolution of European Integration

IV. Regional Integration in Africa & Asia

V. Past & Current Integration in the Americas




I. Economic Integration Terminology

Regional integration agreements are often called Preferential Trade Agreements (PTAs). PTAs come in various forms:

  • A. FREE TRADE ASSOCIATION

  • eliminate tariffs & reduce NTBs

  • B. CUSTOMS UNION

  • FTA + common external tariff with non-members

  • C. COMMON MARKET:

  • customs union + further reduction of NTBs via coordination of economic & social policy

  • often said to involve common currency while some refer to CM + single currency as an economic union

  • D. POLITICAL & ECONOMIC UNION:

  • common market + coordination on non-economic policy-making

II. Issues in Regional Integration

  • a MERCANTILIST question:

  • Will any gains from free trade be sufficient to compensate for lost sovereignty?

  • sovereignty potentially useful to develop comparative advantage via strategic trade policies

  • regional accords sometimes proposed to pursue this regionwide
  • sovereignty desired for other policy goals

  • a LIBERAL question:

  • Do regional accords stimulate new economic activity or simply divert existing activity?

  • trade creation v. trade diversion

  • a STRUCTURALIST question:

  • Will free trade between rich & poor states tend to exploit the poorer nations over time?

  • terms of trade argument

  • an INSTITUTIONALIST question:

  • Under what conditions are different governments, firms, and individuals likely to favor regional accords?

  • more on this in unit IV of this course…

III. The Evolution of European Integration

  • A. The Idea of a United Europe

  • EU-15 together comprise world's largest economy

  • Economic Motive of Greater Unity:

  • harness collective economic potential in a single market

  • Political Motives of Greater Unity

  • ensure regional peace

  • harness potential world political influence via concerted action

III. B. A Brief EU Chronology

  • 1952: European Coal & Steel Community (ECSC) formed by Germany, France, Italy, Belgium, Luxembourg, & the Netherlands

  • 1957: Treaty of Rome establishes EEC

  • 1960: EFTA formed (by non-EEC states)

  • 1963: British entry blocked by France

  • 1966: Luxembourg Compromise: unanimity rule used for major EEC decisions until 1993

  • 1970: EEC becomes self-financing

  • 1973: Denmark, Ireland, & the U.K. join EEC

  • 1979: 1st direct elections to the European Parliament

  • 1979: European Monetary System established

  • 1981: Greece joins

  • 1985: Single European Act signed

  • 1986: Spain & Portugal join

  • 1991: Maastricht Treaty signed

  • A. calls for common currency by 1999

  • Euro launched electronically by 11 states on 1/1/99 & physically on 1/1/02

  • B. 3 “Pillars” of European Union:

  • foreign policy

  • public policy coordination

  • greater political union

  • 1993: EU formally established

  • 1995: Austria, Finland, & Sweden join

  • {n.b. Norway voters rejected membership}

  • 2000: Nice Council paves way for eastward expansion

  • 10 states approved for entry in April 2003

IV. Regional Integration in Africa & Asia

  • A. African Integration Efforts

  • Several enduring subregional monetary unions (countries w/ linked currencies)

  • No major examples of tariff elimination via FTAs, customs unions, or common markets

  • the West African Economic & Monetary Union launched in 2000 aims at converting a long-running monetary union into an economic union




  • B. Asian Integration Efforts

  • While major shares of many Asian countries’ trade is focused regionally, there has been minimal use of formal integration accords

  • The members of the long-running ASEAN security pact agreed in 1992 to form a FTA with all tariffs to be eliminated by 2008

  • minimal progress has taken place so far

  • The members of the large Asia-Pacific Economic Cooperation group made a non-binding agreement in 1994

  • to zero out tariffs among wealthy members by 2010

  • to zero out tariffs among all members by 2020

V. Past & Current Integration in the Americas

  • A. Subregional

  • 1. CENTRAL AMERICAN COMMON MARKET (CACM) [1960]

  • Costa Rica (1962); El Salvador; Guatemala; Honduras; Nicaragua

  • no firm timetable
  • progress in 1990s toward FTA & customs union (esp. in “Northern ”)
  • inclusion of Panama in talks beginning in 1993
  • signed FTA w/ the U.S. in May 2004
  • the pact reopened talk of “hub & spoke” EAI



  • 2. ANDEAN PACT [1969]

  • Bolivia; Colombia; Chile {out '76}; Ecuador; Peru (suspended '92 & then in}; Venezuela {in '73}

  • FTA by 1982 not met

  • reinvigorated by 1990 Act of La Paz

  • est. Andean Community
  • many tariffs eliminated by 1992

  • 1/1/95: customs union est. w/ exceptions

  • 6/00: agree to common market by 12/31/05

  • trade growing at 30%/year among members




  • 3. CARICOM [1973]
    (Caribbean Community and Common Market)

  • Barbados, Guyana, Jamaica, Trinidad & Tobago

  • Antigua & Barbuda, Belize, Dominica, Grenada, Montserrat, St.Kitts-Nevis, St. Lucia, St.Vincent & the Grenadines all joined in 1974; the Bahamas (1983), Suriname (1995), & Haiti (pending) joined later

  • roots in smaller CARIFTA formed in 1968

  • goal of Customs Union by 1983 not met

  • reinvigorated by 1989 summit meeting

  • est. working groups in several single market initiatives
  • most tariffs eliminated by 1991

  • remaining tariffs for poorer states largely phased out by 2001
  • 1992: customs union to be phased in by 1998

  • to date, only 7 members have fully implemented the CET
  • 4. SOUTHERN CONE COMMON MARKET (MERCOSUR) [1991]

  • Argentina; Brazil; Paraguay; Uruguay

  • goal of Common Market by 12/31/95

  • customs union on 12/31/95 w/ several exceptions
  • trade expanded rapidly among members until late ’90s

  • 6/25/96: Chile agrees to FTA w/ Mercosur

  • FTA in 10 years
  • 2/28/97: Bolivia agrees to FTA w/ Mercosur

  • FTA in 10 years
  • 4/16/98: Andean Community accord

  • FTA accord by 1/1/2000 [deadline not met]
  • framework accords w/o deadlines w/ US, Canada, EU, Mexico, & CACM

  • recently in turmoil over Argentine & Brazilian exchange rate policies




  • 5. NORTH AMERICAN FREE TRADE AGREEMENT [1992]

  • Canada; Mexico; U.S.

  • expanded 1988 CUFTA
  • FTA by 2009
  • 6. G-3 PACT [1994]

  • Colombia; Mexico; Venezuela

  • FTA by 2005
  • 7. MEXICO & the NORTHERN [2000]

  • El Salvador, Guatemala, Mexico, Nicaragua

  • FTA by 2012
  • 8. CHILE-U.S. FTA [2003]

  • FTA by 2015

V. (cont.)

  • B. Regional

  • 1. LATIN AMERICAN FREE TRADE ASSOCIATION (LAFTA) [1960]

  • Argentina; Brazil; Chile; Mexico; Paraguay; Peru; Uruguay

+ Colombia & Ecuador {‘61}; Venezuela {‘66}; Bolivia {‘67}

  • FTA by 1973; in '69 extended to 1980...
  • 2. LATIN AMERICAN INTEGRATION ASSOCIATION (LAIA) [1980] ALADI

  • replaced LAFTA w/ new flexibility:

  • new FTAs need not involve all members and may involve non-members
  • 3. The Free Trade Agreement of the Americas (FTAA) [2005?]

  • idea of a hemispheric FTA of “new generation” format

  • in addition to tariff elimination & NTB reduction, its agenda includes a wide range of other issues (many treated in class materials for 9/8/04)


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