Regional Economic Integration refers to growing economic interdependence that results when

countries within a geographic region form an alliance aimed at reducing barriers to trade and
investment. It is important because it helps a lot of countries in overcoming divisions that hinder
the flow of services, goods, capital, people and ideas. These divisions are a considered as
constraint to economic growth, most especially in developing countries.

Furthermore, regional integration is an enabler of economic growth of various countries. Divisions

between countries created by geography, poor infrastructure and inefficient policies are an
impediment to economic growth. But with regional economic 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.

Also, another reason why regional economic integration is important is because it can reduce the
costs of trade thereby reducing prices, improve the availability of goods and services in a given
country, and increase consumer purchasing power in affiliating counties. Employment
opportunities also tend to improve because trade liberalization leads to market expansion,
technology sharing, and cross-border investment.

Regional Economic Integration is good however, it also has its cons or drawbacks and among
them are stated below:

Trade diversion
The flip side to trade creation is actually trade diversion. Member countries may consider trading
more with each other than with nonmember countries. Also, once the bloc is formed, trade to
nonmember countries may be eliminated. This may mean increased trade with a less efficient or
more expensive producer because it is in a member country.

Employment shifts and reductions 

Countries may move production to cheaper labor markets in member countries. Similarly, workers
may move to gain access to better jobs and wages. Sudden shifts in employment can tax the
resources of member countries.

Reduced Global Free Trade

Since members inside the bloc has an established cooperation and integration when it comes to
trade, the conduct of free and worldwide trade will be interrupted. Therefore, tariffs apply to a
non-member country which imposes barrier to trade.

Loss of National Identity

The fact that regional integration increases cross-border contact means that there is a possibility
of dilution of national identity that happens when a certain country is relying more on the
products, service and culture of other country within the bloc.

Sacrifice of Autonomy
Since a country cannot freely make decisions by its own without obtaining consent from other
countries, autonomy is quite impeded thereby resulting to a more upper hand of the other
countries.

Transfer of Power to Advantaged Firms

Regional integration can concentrate economic power in the hands of fewer, more advantaged
firms. Larger, foreign competitors that have stronger brands, or enjoy other advantages can
overwhelm local firms in their home markets. Since regional integration encourages mergers and
acquisitions within the bloc, larger rivals are created, and small firms or businesses are dissolved.

Failure of Small or Weak Firms

The protection of small firms from foreign competition is lost due to the decline of trade and
investment barriers.

Corporate Restructuring and Job Loss

Increased competitive pressures and corporate restructuring may lead to worker layoffs or re-
assigning employees to distant locations- disrupting worker lives and entire communities.