Market Integration

MARKET INTEGRATION : DEFINITION

 "ALL CONTRACTING PARTIES MUST ACCORD ANY ADVANTAGE , FAVOUR, PRIVILEGE OR IMMUNITY GRANTED
TO ANY PRODUCT FROM ANY OTHER COUNTRY IMMEDIATELY AND UNCONDITIONALLY TO ALL OTHER
MEMBERS " -GATT 1948
 I NTEGRATION IS TO STIMULATE TRADING AMONG COUNTRIES ... FOLLOWING COMPARATIVE ADVANTAGE
THEORY -K OESTER (2000)
 A SITUATION IN WHICH SEPARATE MARKETS FOR THE SAME PRODUCT BECOME ONE SINGLE MARKET (E.G.
IMPORT TAX IN ONE OF THE MARKETS IS REMOVED )- C AMBRIDGE DICTIONARY

5 STAGES OF GLOBAL MARKET INTEGRATION IN 20TH CENTURY

HISTORY OF MARKET INTEGRATION 20 TH CENTURY

STAGE 1: 1900-1917

 Majority of the developed nations were linked to the gold standard in 1900
 Classical Economic School of Thought: Comparative Advantage and Specialization (David
Ricardo)
 Rapid spread of technology
- mass production and consumption
- invention of automobiles led to new production and new consumption pattern

Stage 2: 1918-1940s
 defensive market-seeking investment with adoption of Keynesian economic policies
 Growing role of foreign direct investment (FDI) in some economies and started to have
branch plants of foreign (later to be called multinational) enterprises

Stage 3: 1945-Late 1960's

 Bretton Woods
 most dramatic impact on trade liberalization
 1950's Economic Boom

Stage 4: From Late 1960s to Mid-1980

 New generation of technological discoveries (automation and computerization) and
telecommunications
 Oil Crisis (1973)
 Most developing countries were relaxing some of the restrictive regulatory structures
towards inbound investment (Mid-1980)
 Special Economic Zones
Stage 5: Mid-1980s to 2000
 Rapid pace of scientific and technological development
 Strengthening the Vertical Specialization/ Cross-border organization

Multinational Corporations

Plays a vital role in trade liberalization

Definition
 Have centers of operation in more than one country -Black’s Law Dictionary (1990)
 With basis of two conditions: "Foreign sales account for at least 20 percent of revenues and
direct capital investment exists in at least 6 other countries" -Michel, A., & Shaked, I. (1986)
 "A multinational or transnational enterprise is an enterprise that engages in foreign direct
investment (FDI) and owns or, in some way, controls value-added activities in more than one
country" -Dunning, J. H., & Lundan, S. M. (2008).

Attributes
 Operates in more than one country (at least 6 countries) in view of producing goods or
delivering services
 Generates at least 20% of its revenue from other countries
 Engages in foreign direct investment
 Creates multiple value-added activities across national boundaries and cross-border markets in
producing intermediate product
 International financial Institutions and Global Economy

Objectives of International financial institutions

 Providing loans, credits and grants to national governments in

order:
- to reduce global poverty and improve people's living conditions and standards;
- to support sustainable economic, social and institutional development; and
- to promote regional cooperation and integration
 International Financial Institutions:
- African Development Bank
- Asian Development Bank
- Caribbean Development Bank
- European Bank for Reconstruction & Development
- Inter-American Development Bank
- World Bank
- Other IFIs & Institutions