what is the economic impact on joining regional economic integration?

Answer 1

Partnering with any others means you can pull resources and the market. The tariff would also be favorable for trades, so it create a very productive environment.

The problem in the short run, however, do exist since it will impact the job market (US high paid workers has to compete with cheap laborers in China and Mexico, for example) as well as the local businesses that has to compete with possibly more efficient foreign market. So, the concept of the survival to fittest and the laws of supply and demand and wipe out smaller businesses without subsidies.

In the long run, it is good to promote these type of cooperations, as it forces the businesses to become more efficient.

Answer 2

Economic Integration goes beyond dropping tariffs and other barriers to trade.

If you simply decrease tariffs and other barriers to trade within the group (while maintaining high tariffs and barriers on outsiders) then this should promote trade within the group. Prices o goods imported from within the group will fall. However that also means that domestic industries which were marginally profitable and relying on the tariffs and other barriers to survive will lose out, causing some initial unemployment.

Theory would have you seeing these unemployed people and capital moving to the industries where the country gains via exporting more to the group. Therefore there would be a redistribution of employment and investment across industries with each economy specialising in what it does comparatively better than the other members in the group. Hence everybody gains.

Of course in real life, we know of the problems with labour mobility: not all jobs are the same, some regions will be hit harder than others causing localised pockets of unemployment.

Furthermore as markets grow, this could cause the development of monopolistic firms that use scale, better information and technology, and lower average costs to drive competitors out of the market. Monopolies can then rule the market which was previously 'competitive'.

The overall effects also depend on how similar the economies in the group are. If the countries originally specialise in different products to start with, then there would be less of the problems with employment. On the other hand if there is large overlap and the products are quite homogeneous, then there will be more displacement. Furthermore, if there is a technology gap, then the market domination by one country could potentially arise.

However, a monopoly within the group can mean lower costs of production by taking advantage of scale and extra competitiveness beyond the group on the international markets. Basically a regional champion can grow behing the tariff barriers to the outside world, then once established take on the world.

If you want economic integration, then barriers to labour flow are also dropped, like in Europe. Theoretically, this will lead to people moving where their skills are valued more, hence creating a single market for goods and services, as well as for labour. This means that wages would be equalised. What this means is that for people who are paid more to do a job others do for less (i.e 'overpaid'), they might have to take a lower wage. But prices will also be falling as costs of production fall.

In real life however, prices never fall that much, so people who are 'overpaid' will tend to lose out in monetary and real terms. But one can also question the mobility of labour because of differences in language, and social issues like age and family ties for example.

In sum, the disadvantages would mainly be to labour as people are more inflexible and less mobile than capital. Another issue would be the potential for amrket domination due to scale and technology, and the 'inequality' of the distribution of the advantages.

The advantages would take the form of lower prices, and possible growth of regional champions, and as economic activity is spurred higher employment.

For economic integration, the advantages areincreased since labour can theoretically physically move, but that would mean more issues for 'overpaid' workers.