Purchase Solution

regional economic integration

Not what you're looking for?

Ask Custom Question

A) What are the pros and cons of regional economic integration?

B) How would you describe American culture?

C) Why is it important to understand the political and economic history of a region when expanding into markets in that region?

D) What kinds of business risks does your organization face? Would these risks differ in a global environment?

Purchase this Solution

Solution Summary

What are the pros and cons of regional economic integration?

Solution Preview

A) What are the pros and cons of regional economic integration?

Let us first see the role of regional integration such as NAFTA or EU in promoting global business or in other words, its core advantages.

Trade gains: If goods are sufficiently strong substitutes, regional trade agreements will cause the demand for third party goods to decrease, which will drive down prices. In addition, more acute competition in the trade zone may induce outside firms to cut prices to maintain exports to the region. This will create a positive terms of trade effect for member countries.

Increased returns and increased competition: Within a tiny market, there may be a trade-off between economies of scale and competition. Market enlargement removes this trade-off and makes possible the existence of (i) larger firms with greater productive efficiency for any industry with economies of scale and (ii) increased competition that induces firms to cut prices, expand sales and reduce internal inefficiencies.

Investment: Regional trade agreements may attract FDI both from within and outside the regional integration arrangement (RIA) as a result of (i) market enlargement (particularly for "lumpy" investment that might only be viable above a certain size), and (ii) production rationalization (reduced distortion and lower marginal cost in production).

Security : Entering RTAs (Regional Trade agreements) may increase intra-regional trade and investment and also link countries in a web of positive interactions and interdependency. This is likely to build trust, raise the opportunity cost of war, and hence reduce the risk of conflicts between countries.

Coordination and bargaining power: Within RTAs, coordination may be easier than through
multilateral agreements since negotiation rules accustom countries to a give-and-take approach, which makes tradeoffs between different policy areas possible.

source: ...

Solution provided by:
Education
  • BCom, SGTB Khalsa College, University of Delhi
  • MBA, Rochester Institute of Technology
Recent Feedback
  • "Thank you. "
  • "Thank you"
  • "Thank you. I got 20/20 last week for my discussion you help me out with."
  • "Thank you. Great Job. "
  • "Thank you. Great Job. "
Purchase this Solution


Free BrainMass Quizzes
Six Sigma for Process Improvement

A high level understanding of Six Sigma and what it is all about. This just gives you a glimpse of Six Sigma which entails more in-depth knowledge of processes and techniques.

Cost Concepts: Analyzing Costs in Managerial Accounting

This quiz gives students the opportunity to assess their knowledge of cost concepts used in managerial accounting such as opportunity costs, marginal costs, relevant costs and the benefits and relationships that derive from them.

Accounting: Statement of Cash flows

This quiz tests your knowledge of the components of the statements of cash flows and the methods used to determine cash flows.

Learning Lean

This quiz will help you understand the basic concepts of Lean.

Managing the Older Worker

This quiz will let you know some of the basics of dealing with older workers. This is increasingly important for managers and human resource workers as many countries are facing an increase in older people in the workforce