International Trade the World Economy Charles van Marrewijk

International Trade & the World Economy; Charles van Marrewijk CHAPTER 13; ECONOMIC INTEGRATION Introduction Types of regional economic integration Neo-classical theory of economic integration Regional trade agreements Regionalism and the new trade theory Europe and the European Union Future enlargement of the European Union Conclusions

International Trade & the World Economy; Charles van Marrewijk CHAPTER 13; ECONOMIC INTEGRATION Introduction Types of regional economic integration Neo-classical theory of economic integration Regional trade agreements Regionalism and the new trade theory Europe and the European Union Future enlargement of the European Union Conclusions

International Trade & the World Economy; Charles van Marrewijk Introduction Jacob Viner (1892 - 1970)

International Trade & the World Economy; Charles van Marrewijk CHAPTER 13; ECONOMIC INTEGRATION Introduction Types of regional economic integration Neo-classical theory of economic integration Regional trade agreements Regionalism and the new trade theory Europe and the European Union Future enlargement of the European Union Conclusions

International Trade & the World Economy; Charles van Marrewijk Types of regional economic integration Preferential trade agreement (PTA); ACP countries Free trade area (FTA); EFTA, NAFTA Customs union; EEC Common market; EU Economic union; EMU

International Trade & the World Economy; Charles van Marrewijk CHAPTER 13; ECONOMIC INTEGRATION Introduction Types of regional economic integration Neo-classical theory of economic integration Regional trade agreements Regionalism and the new trade theory Europe and the European Union Future enlargement of the European Union Conclusions

International Trade & the World Economy; Charles van Marrewijk Neo-classical theory of economic integration Trade creation

International Trade & the World Economy; Charles van Marrewijk Neo-classical theory of economic integration Trade diversion

International Trade & the World Economy; Charles van Marrewijk CHAPTER 13; ECONOMIC INTEGRATION Introduction Types of regional economic integration Neo-classical theory of economic integration Regional trade agreements Regionalism and the new trade theory Europe and the European Union Future enlargement of the European Union Conclusions

International Trade & the World Economy; Charles van Marrewijk Regional trade agreements COMESA countries

International Trade & the World Economy; Charles van Marrewijk Regional trade agreements ASEAN countries

International Trade & the World Economy; Charles van Marrewijk Regional trade agreements

International Trade & the World Economy; Charles van Marrewijk CHAPTER 13; ECONOMIC INTEGRATION Introduction Types of regional economic integration Neo-classical theory of economic integration Regional trade agreements Regionalism and the new trade theory Europe and the European Union Future enlargement of the European Union Conclusions

International Trade & the World Economy; Charles van Marrewijk Regionalism and the new trade theory Using a Dixit-Stiglitz type model with the world consisting of many provinces which may form b trading blocs, welfare is non-monotonic

International Trade & the World Economy; Charles van Marrewijk CHAPTER 13; ECONOMIC INTEGRATION Introduction Types of regional economic integration Neo-classical theory of economic integration Regional trade agreements Regionalism and the new trade theory Europe and the European Union Future enlargement of the European Union Conclusions

International Trade & the World Economy; Charles van Marrewijk Europe and the European Union

International Trade & the World Economy; Charles van Marrewijk Europe and the European Union Establishing a common market (EEC treaty) with four freedoms: • Free movement of goods (Cassis-de-Dijon case, 1979). • Free movement of persons • Free movement of services • Free movement of capital The main institutions of the European Union are: • The Council of the European Union • The European Commission; • The European Parliament; • The European Court of Justice • The European Central Bank (ECB)

International Trade & the World Economy; Charles van Marrewijk Europe and the European Union Green circle: former EFTA Red star: potential EU member

International Trade & the World Economy; Charles van Marrewijk CHAPTER 13; ECONOMIC INTEGRATION Introduction Types of regional economic integration Neo-classical theory of economic integration Regional trade agreements Regionalism and the new trade theory Europe and the European Union Future enlargement of the European Union Conclusions

International Trade & the World Economy; Charles van Marrewijk Future enlargement of the European Union

International Trade & the World Economy; Charles van Marrewijk Future enlargement of the European Union

International Trade & the World Economy; Charles van Marrewijk CHAPTER 13; ECONOMIC INTEGRATION Introduction Types of regional economic integration Neo-classical theory of economic integration Regional trade agreements Regionalism and the new trade theory Europe and the European Union Future enlargement of the European Union Conclusions

International Trade & the World Economy; Charles van Marrewijk Conclusions • There are many regional trade agreements (RTAs) in the world. • We also distinguish FTAs, customs union, common market, economic union. • RTAs in general increase welfare through trade creation, but the discriminatory nature of an RTA may make the net welfare effect negative. • Increased popularity of Regionalism rather than Multilateralism may be bad for the world economy. • EU is most succesful and powerful economic integration scheme; many CEE countries want to join; EU’s political decision process needs to be revised.