International Economic Integration

‘International economic integration’ is one aspect of ‘international economics’ which has been growing in importance in the past two decades or so. The term itself has a rather short history; indeed, Machlup (1977) was unable to find a single instance of its use prior to 1942. Since then the term has been used at various times to refer to practically any area of international economic relations. By 1950, however, the term had been given a specific definition by economists specialising in international trade to denote a state of affairs or a process which involves the amalgamation of separate economies into larger regions, and it is in this more limited sense that the term is used today. More specifically, international economic integration is concerned with the discriminatory removal of all trade impediments between the participating nations and with the establishment of certain elements of cooperation and coordination between them. The latter depends entirely on the actual form that integration takes. Different forms of international integration can be envisaged and some have actually been implemented: (i) free trade areas where the member nations remove all trade impediments among themselves but retain their freedom with regard to the determination of their policies vis-à-vis the outside world (the non-participants), for example, the European Free Trade Association (EFTA), the Latin American Free Trade Area (LAFTA), etc;