International Trade Integration

No doubt international trade has existed spanning civilizations, in the current global economic situation no country can keep away without participating in international trade. Countries are moving cautiously away from capitalistic and protectionist outlook and engaging in trade with other countries.

With the creation of WTO, there have been constant efforts made to unite countries to create more markets, to standardize tariffs and trade laws as well as remove trade barriers in trying to create free markets.

We have seen very many bi lateral and multi lateral agreements taken place that have harmonized international trade to a large extent. Together with the agreements, several countries have begun to form unions to harmonize and free trade regulations within themselves in a bid to create free markets. One such example is the Economic Union of European Countries. Initially EU was a Customs Union that further developed into Economic Union.

Countries have also formed several other types of unions as well as zones in a bid to give impetus to international trade. We shall discuss a few of them briefly in this article.

Customs Union

Customs Union refers to a coming together of member countries to form a union where in they allow free trade amongst the member countries without customs duties and tariffs. However they formulate a common external trade policy to determine common import duties that are levied for imports from a third party country other than the member country.

Customs Union is the first step towards harmonizing and removing trade barriers to facilitate smoother and increased trade flow within the member groups. This would result in increased economic efficiency and improve political relationships amongst the members too paving way for further economic integration.

The Customs Union of Zollverein which was formed out of coming together of German States is another example of Customs Union. Customs Union can also be called Free Trade Zones with common Trade Tariffs and Policies.

Free Markets & Economic Integration

Customs Union can also be called Free Trade Zones with common Trade Tariffs and Policies.

Customs Union is the first step towards building Economic integration that leads to formation of common markets and economic unions and federation.

Common markets allow free movement of all resources including labor, capital as well as other resources without tariffs and formalities.

Economic Union

Economic Union is a trade bloc, which consists of both free markets and Customs Union pwithin the member community.

Economic Unions involve close co-ordination and integration of economic and fiscal policies of the member countries

Examples: European Union, CARICOM - Single Market and Economy of Caribbean Community.

Monetary Union, Customs and Monetary Union

Creation of Economic Union paves way for creating a Monetary Union and further evolves into a Customs and Monetary Union.

Under this Union, member countries enjoy common economic union with free markets with no restriction on movement of goods, labor, capital and resources across member countries, common tariffs for external trade, besides combining it with a common monetary currency system.

Examples: Common Monetary and Economic Community of Central Africa.

Economic Integration

Economic Union and Monetary Unions finally lead up to Complete Economic Integration as the final stage. In Economic Integration, the member countries operate with single currency and fiscal policy coupled with single economic policy and function as single economy.

To achieve and stabilize single economy, it necessitates the political integration, which brings into being the concept of United Countries with autonomous states governed by federal government. United States of America is the outstanding example of such integration evolving into one Nation.


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