Sometimes this process in which nations promote free trade and usually create institutions to streamline economic cooperation, is also followed by political integration as well. The best example is definitively the European Union, which, is a product of the European Community.
We can immediately think of several advantages of this new emerging model: trade creation, greater consensus, political cooperation because of the significantly greater political influence than each nation would have individually, environmental opportunities like trade liberation and market expansion and investment, among others.
But how about the drawbacks, meaning the creation of Trading Blocs: It can also increase trade barriers against non-member countries. Trade Diversion in which trade is diverted from a non-member country to a member country despite the inefficiency in cost. For example, a country has to stop trading with a low cost manufacture in a non-member country and trade with a manufacturer in a member country which has a higher cost, and the national sovereignty, that requires member countries to give up some degree of control over key policies like trade, monetary and fiscal policies. The higher the level of integration, the greater the degree of controls that needs to be given up particularly in the case of a political union economic integration which requires nations to give up a high degree of sovereignty.
Regional integration had emerged as one of the most important developments in world politics. It is not a new phenomenon, however, using this tool of political economy, has a high risk for the countries involved because some integration schemes have succeeded... [continues]
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