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Tuesday, June 7, 2011

Stages of Economic Integration: Free Trade Area, Customs Union, Common Market..

Stages of economic integration include; The preferential Trade Area(PTA), Free Trade Area (FTA), Customs Union(CU), Common Market (CM), Economic Community or Monitory Union and Economic Union or Political Federation.

Countries engage in economic integration in order to eliminate barriers tointernational trade(Carbaugh,2009),facilitate payments and factor mobility within the the economic bloc.

Issues under consideration vary from stage of economic integration to another. In general however the Free Trade Area includes trade arrangements on preferential terms in accordance with the rules of origin. The Customs Unions involves mainly a common external tariffs, dispute settlement mechanisms, common external policy and common regional institutions. The Common Market includes free movement of factors of production and natural persons. A monitory union involves a common monetary (common currency) and fiscal policies between parties while under a political federation parties agree to implement uniform political institutions and policies between themselves. Political federation is the last of the Stages of economic integration. For details on Stages of economic integration, please visit.Stages of Economic Integration and African Experience

Wednesday, June 1, 2011

Toolkit for WTO Rules on Regional Trade Integration Agreements or Economic Integration

Compliance to WTO Rules is a major requirement when dealing with regional trade integration agreements or econmic integration agreements. The Preamble to the WTO Agreement highlights “... the elimination of discriminatory treatment in international relations” as an objective of the Multilateral Trading System. The Most-Favoured-Nation (MFN) commitment by WTO Members is a fundamental instrument for achieving that aim. However the MFN treatment changes when dealing with regional economic integration.


When establishing a regional trade integration agreement(RTA), Members of WTO that are parties to the economic integration need some kind of derogation to avoid legal inconsistency with the MFN rule. The WTO Member has always the possibility of seeking a waiver. But, over time, the system itself has developed a series of conditional exceptions which Members can invoke when departing from their MFN commitment: These are in GATT Article XXIV, Enabling Clause, Understanding on GATT Article XXIV and GATS Article V.


Establishment of a regional trade integration requires that common principles of WTO be put into consideration. An economic integration or regional trade agreement  should facilitate trade among the parties, provide for mutual/reciprocal trade concessions and must not result in barriers towards third parties higher than those existing before the formation of the economic integration agreement. Read more about Regional Trade Integration Agreements and Compliance to WTO Rules
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