What is Regional Integration?

Regional integration is the process by which two or more nation-states agree to co-operate and work
closely together to achieve peace, stability and wealth.
Usually integration involves one or more written agreements that describe the areas of cooperation
in detail, as well as some coordinating bodies representing the countries involved.
This co-operation usually begins with economic integration and as it continues, comes to include
political integration. We can describe integration as a scale, with 0 representing no integration at all
between two or more countries. Ten would represent complete integration between two or more
countries. This means that the integrating states would actually become a new country — in other
words, total integration.
We could also say that on the table below, 1-4 represents economic integration while 6-10
represents political integration. The halfway stage, 5, represents the single market, or the
completion of economic integration.

0 5 10
No integration Single Market Total Integration

Regional Integration is a process in which neighboring countries enter into an agreement in order
to upgrade cooperation through common institutions and rules. The objectives of the agreement
could range from economic to political to environmental, although it has typically taken the form of
a political economy initiative where commercial interests are the focus for achieving broader socio-
political and security objectives, as defined by national governments. Regional integration has been
organized either via supranational institutional structures or through intergovernmental decision-
making, or a combination of both.
Past efforts at regional integration have often focused on removing barriers to free trade in the
region, increasing the free movement of people, labour, goods, and capital across national borders,
reducing the possibility of regional armed conflict (for example, through Confidence and Security-
Building Measures), and adopting cohesive regional stances on policy issues, such as the
environment, climate change and migration.

Economic Integration Explained

When regional economies agree on integration, trade barriers fall and economic and political
coordination increases.
Specialists in this area define seven stages of economic integration: a preferential trading area, a
free trade area, a customs union, a common market, an economic union, an economic and monetary
union, and complete economic integration. The final stage represents a total harmonization of fiscal
policy and a complete monetary union.
Economic integration, or regional integration, is an agreement among nations to reduce or eliminate
trade barriers and agree on fiscal policies.
The European Union, for example, represents a complete economic integration.
Strict nationalists may oppose economic integration due to concerns over a loss of sovereignty.

Regional integration also allows better utilization of economies of scale for the realization of which
the markets of individual developing countries are frequently too small. In addition, competition
becomes more intensive in an integration area, compared with the protected national markets.
Finally, the establishment of regional integration strengthens the member countries' international
position in both political and economic terms.
On the whole, however, regional integration can offer a suitable means of escape from the dilemma
in which many developing countries find themselves: on the one hand, their domestic markets and
their resources endowment are not large enough to allow them to manage entirely without foreign
economic relations (such as China up to the end of the 1970s) while, on the other hand, in many
developing countries the preconditions for complete exposure to the outside world have been
insufficiently developed. Thus regional integration combines free trade within the region with
protection of the region from the rest of the world
BENEFITS OF REGIONAL ECONOMIC INTEGRATION
Regional integration helps countries overcome divisions that impede the flow of goods, services,
capital, people and ideas. These divisions are a constraint to economic growth, especially in
developing countries. The World Bank Group helps its client countries to promote regional
integration through common physical and institutional infrastructure.
Divisions between countries created by geography, poor infrastructure and inefficient policies are an
impediment to economic growth. Regional integration allows countries to overcome these costly
divisions integrating goods, services and factors’ markets, thus facilitating the flow of trade, capital,
energy, people and ideas.
Regional integration can be promoted through common physical and institutional infrastructure.
Specifically, regional integration requires cooperation between countries in:
• Trade, investment and domestic regulation;
• Transport, ICT and energy infrastructure;
• Macroeconomic and financial policy;
• The provision of other common public goods (e.g. shared natural resources, security,
education).
Cooperation in these areas has taken different institutional forms, with different levels of policy
commitments and shared sovereignty, and has had different priorities in different world regions.
Regional integration can lead to substantial economic gains. Regional integration allows countries
to:
• Improve market efficiency;
• Share the costs of public goods or large infrastructure projects;
• Decide policy cooperatively and have an anchor to reform;
• Have a building block for global integration;
• Reap other non-economic benefits, such as peace and security.
Advantages of Economic Integration
The advantages of economic integration fall into three categories: trade benefits, employment, and
political cooperation.
More specifically, economic integration typically leads to a reduction in the cost of trade, improved
availability of goods and services and a wider selection of them, and gains in efficiency that lead to
greater purchasing power.

Economic integration can reduce the costs of trade, improve the availability of goods and services,
and increase consumer purchasing power in member nations.
Employment opportunities tend to improve because trade liberalization leads to market expansion,
technology sharing, and cross-border investment.
Political cooperation among countries also can improve because of stronger economic ties, which
provide an incentive to resolve conflicts peacefully and lead to greater stability.

POLITICAL ADVANTAGE OF REGIONAL INTEGRATION

Political cooperation among countries also can improve because of stronger economic ties, which
provide an incentive to resolve conflicts peacefully and lead to greater stability.