Benefits of Regional Integration: Redefining the Concept

Abstract

For decades, the topic of regional integration has been considered in research through its economic benefits. The classic theories of customs unions and optimum currency area, together with, to a lesser extent, the new regionalism approach are based on analyses of potential costs and benefits of regional associations. Regional integration is traditionally understood as a way to encourage trade flow between member states, to facilitate more efficient allocation of resources by stimulating competition by increasing the capacity of the internal market. That is expected to result in faster economic growth and, consequently, increased per capita income. The 70-year history of the European Union provides sufficient research material to analyze whether economic benefits truly are the main driving force of regional integration. With this goal in mind, the presented article first sums up the key reasons for the post-war unification of Western Europe, then explores the position of the cost-benefit analysis in the theory of regional integration, and finally analyzes the degree of influence of welfare effects on strategic decisions of the European Union. The analysis shows that economic gain is not an immanent property of regional integration: it does not occur at all stages of the process and is neither its primary goal nor its driving force. Instead, regional integration aims to respond to the changing global order, i.e., help member states strengthen their international position and protect themselves from undesirable external influence. While economic benefits are also important, they are not necessarily the decisive factor.

Evolution of trade and productive integration in Latin America, 1995–2015: an input-output analysis

“…Among the general economic aspects, we can highlight the need for partners to coordinate macroeconomic policies, noting that the reduction of potential gains is due to the lack of coordination, particularly in terms of increasing intra-regional trade (Malamud, 2013). The market determinants include, among others, the need to achieve significant levels of complementarity between economies in order to increase the share of intra-regional trade and achieve greater benefits in terms of welfare (Butorina and Borko, 2022). Hosny (2013) mentions that most DCs consider integration as an instrument to increase their competitiveness in the global economy and thus place an increasing number of products in international markets.…”

“…First, coordination of macroeconomic policies and tariff frameworks among partners aimed at increasing intraregional trade, is indispensable to increase the gains from integration (Malamud, 2013). The second, economic integration between countries at similar levels of development, requires achieving significant degrees of productive complementarity (Butorina and Borko, 2022). JEFAS This is particularly difficult in the case of Latin America because most trading partners are characterized by comparative advantages based on the exploitation of natural resources.…”

Examining the Patterns and Dynamics of Intra-Regional Trade and Revealed Comparative Advantage in the East African Community

“…The removal of trade obstacles is one of the reasons why countries choose to join free trade areas, including other benefits such as increased trade volume, reduced and eliminated tariffs, dealing with behind-the-border hurdles that would otherwise stifle trade, and promoting investment and people-to-people collaboration (see Baccini, 2019;Plummer et al, 2010). There is an added benefit of having a common external tariff (CET) for regional accords that go beyond free trade areas to common markets, when members of the grouping command a common tariff for goods coming in or going to non-member nations (te Velde, 2011).3 Another benefit emerges from member states changing the composition of their export basket; either becoming stronger in exporting products in which they have a comparative advantage, or switching to exporting products they previously did not export due to opportunities given by liberalised trade (see Butorinaa and Borkoa, 2022). According to data from research on how RTA s impact intra-regional trade of member countries (see for example, Kagochi and Durmaz, 2018;Mukwaya, 2019), the rebirth of the Community is supposed to have promoted intra-EAC trade.…”