5.1.1 Levels of economic integration
There are five major levels of economic integration which are explained in your textbook (Hill, 2005, pp. 269-270). They are listed in order from least integrated to most integrated, and their principal features are detailed in Table 5.1. It would be a good idea to read the textbook as you register the detail of Table 5.1
In your text
Hill 2005, Chapter 8, pp. 267-270.
Table 5.1 Level of economic integration
Type (Level) |
Example |
Membership |
Principal features |
Free Trade Area |
North American Free Trade Agreement (NAFTA) Closer Economic Relations (CER) |
United States Canada Mexico Australia New Zealand |
No internal tariffs. Each country determines its own trade policies toward non-members. |
Customs Union |
Andean Pact |
Bolivia Colombia Ecuador Peru |
As for FTA above. Common external tariff on goods imported from outside. |
Common Market |
European Community (EC) before January 1994. There has not been another. |
12 European countries. |
As for customs union above. Labour and capital free to move. No restrictions on migration. |
Economic Union |
European Union (EU) as from January 1999. |
25 European countries. |
As for common market above. Common currency - European Monetary Unit (called the 'Euro') Harmonisation of tax rates. Common monetary and fiscal policies. |
Political Union |
EU has some elements; see previous level. The ultimate aim is a United States of Europe. |
25 European countries, but may include 28 countries by 2007. |
European parliament, directly elected by citizens of EU countries. Council of Ministers: government ministers for each EU country. An administrative bureaucracy. Court of Justice: the official interpreter of EU law. |
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