Question

Describe the main arguments in favour and against regional economic integration

Answer 1

Pros: REI can bring trade benefits, employment and political cooperation. More specifically, REI leads to a reduction in the cost of trade and can result in trade creation, and therefore increase the selection of products and purchasing power. The free flow of factors of production as well as the expanded market within the region may lead to better utilisation of labor. Political cooperations among countries can improve because of stronger economic ties, which can help resolve conflicts peacefully and lead to greater stability

Cons: REI has costs. The disadvantages include trade diversion and the erosion of national sovereignty. For example, the REI may divert trade away from the non-members which can produce at a lower cost to the members with which the cost of trade is lower, and this can be economically detrimental. Additionally, members of economic unions are typically required to adhere to rules on trade, monetary policy and fiscal policy which are established by an unelected external policymaking body. Sovereignty, in fact, was