Economic Integration

AAA

DEFINITION of 'Economic Integration'

An economic arrangement between different regions marked by the reduction or elimination of trade barriers and the coordination of monetary and fiscal policies. The aim of economic integration is to reduce costs for both consumers and producers, as well as to increase trade between the countries taking part in the agreement.

INVESTOPEDIA EXPLAINS 'Economic Integration'

There are varying levels of economic integration, including preferential trade agreements (PTA), free trade areas (FTA), customs unions, common markets and economic and monetary unions. The more integrated the economies become, the fewer trade barriers exist and the more economic and political coordination there is between the member countries.


By integrating the economies of more than one country, the short-term benefits from the use of tariffs and other trade barriers is diminished. At the same time, the more integrated the economies become, the less power the governments of the member nations have to make adjustments that would benefit themselves. In periods of economic growth, being integrated can lead to greater long-term economic benefits; however, in periods of poor growth being integrated can actually make things worse.

RELATED TERMS
  1. Free Trade Area

    A group of countries that invoke little or no price control in ...
  2. Tariff

    A tax imposed on imported goods and services. Tariffs are used ...
  3. Trade War

    A negative side effect of protectionism that occurs when Country ...
  4. Quota

    A government-imposed trade restriction that limits the number, ...
  5. Protectionism

    Government actions and policies that restrict or restrain international ...
  6. Factor Market

    A marketplace for the services of a factor of production.
RELATED FAQS
  1. How do government bailouts increase moral hazard?

    Government bailouts increase moral hazard by engendering a business climate in which companies feel they will be protected ... Read Full Answer >>
  2. How is free enterprise affected by monetary policy?

    Monetary policy is concerned with the quality, quantity and function of money instruments in an economy. Perhaps the best ... Read Full Answer >>
  3. Who developed the theory of economic externality?

    British economist Arthur C. Pigou advanced the theory of economic externalities, which he most notably expressed in his book, ... Read Full Answer >>
  4. How are earmarks and pork barrel spending related?

    Both earmarks and pork barrel spending involve spending money on certain projects or specific events. Projects paid for by ... Read Full Answer >>
  5. What does it mean when a country has little activity in its capital account?

    Since a country's capital account represents money flow into the country through foreign investment, having only a small ... Read Full Answer >>
  6. What are the most effective ways to reduce moral hazard?

    There are a number of ways to reduce moral hazard, including the offering of incentives, policies to prevent immoral behavior ... Read Full Answer >>
Related Articles
  1. Personal Finance

    What Is International Trade?

    Everyone's talking about globalization, so we explain what is it and why some oppose it.
  2. Economics

    The Basics Of Tariffs And Trade Barriers

    Everything you need to know - from the different types of tariffs to their effects on the local economy.
  3. Economics

    What Is The World Trade Organization?

    The WTO sets the global rules of trade. But what exactly does it do and why do so many oppose it?
  4. Economics

    Current Countries Under A Western Embargo

    We look at which countries the United States and European Union have imposed an imposed embargoes on and why.
  5. Economics

    How Changing Demographics Affects U.S Elections

    With the 2016 election upcoming, the change in two of the country's largest demographics will go a long way in determining who controls the White House.
  6. Economics

    What Is Supply?

    Supply is the amount of goods a producer is willing to produce at a given price, and is one of the most basic concepts in economics.
  7. Economics

    What is a Management Buyout?

    A management buyout, or MBO, is a transaction where a company's management team purchases the assets and operations of the business they manage.
  8. Economics

    What Part of the Money Supply is M2?

    M2 is the part of the money supply economists use to analyze and predict inflation.
  9. Economics

    Modified Internal Rate of Return (MIRR)

    Modified internal rate of return (MIRR) is a variant of the more traditional internal rate of return calculation.
  10. Economics

    Explaining Cash On Delivery

    Cash on delivery, also referred to as COD, is a method of shipping goods to buyers who do not have credit terms with the seller.

You May Also Like

Hot Definitions
  1. Geometric Mean

    The average of a set of products, the calculation of which is commonly used to determine the performance results of an investment ...
  2. Fisher Effect

    An economic theory proposed by economist Irving Fisher that describes the relationship between inflation and both real and ...
  3. Fiduciary

    1. A person legally appointed and authorized to hold assets in trust for another person. The fiduciary manages the assets ...
  4. Expected Return

    The amount one would anticipate receiving on an investment that has various known or expected rates of return. For example, ...
  5. Carrying Value

    An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance ...
  6. Capital Account

    A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public ...
Trading Center