Regional integration refers to the implementation of free and fair trade in countries located within the same region. The member countries in regional integration promote trade by removing the barriers such as taxes imposed on foreign businesses. These countries are also responsible for creating rules that determine the way business will be conducted in the region. The stages of regional economic integration include; Free trade area, custom union, common market, and economic union(Gaspar, Kolari, and Hise 61).
During the free trade area, a group of countries, which are committed to removing all the business barriers that guide the flow of goods and services among them form coalitions that allow the business people residing in their countries to conduct businesses freely in the region. They, however, maintain their independent policies for their external trade. A custom union is a form of economic integration within a specific region that combines the features of free trading with common policies shared by the countries towards other countries that do not participate in the regional trade. This ensures that external or foreign businesses providing services to the consumers within this region are governed by the same laws.
Common markets refer to the stage where countries involved in the regional trade progress from establishing a free market to providing their clients with free movement and application of the factors of production. As such, businesses can pay the same amount to obtain raw materials in all the countries involved. Economic union, which defines the commitment that these countries have to remove barriers, is the stage characterized with harmonization of the currency, taxation rates, and other barriers affecting local businesses. Aside from this, these countries also pursue a common policy for external trade (Gaspar, Kolari, and Hise 62).
Some of the advantages associated with regional integration include its ability to increase the number of consumers that participate in the trading activities within the region. This also promotes the region’s economic status globally through free capital flow, technology advances, and availability of labor in the productive areas. It also increases the security of the region through shared responsibilities to protect the countries, and encourage the members of these countries to enhance their social welfare levels to match that of the most developed state in the region (Gaspar, Kolari, and Hise; Peng 240).
The disadvantages associated with economic regional integration include undermining the rule of the status of the most favored nation, imposing uniform laws and regulations, increasing rates of unemployment, and increasing the probability of rising crime rates that are associated with the supply of illegal substances such as ivory and drugs. This integration also contributes to reduced powers of the national governments (Gaspar, Kolari, and Hise 63).
If I were hired as an advisor for countries planning to implement regional integration, I would recommend careful assessment of their tax regulations and other policies that govern the performance of foreign businesses in these countries. This would ensure that all the countries get the best offers and the most developed country in the region is not forced to alter its rules. I would also recommend the need to start small. They should have a clear goal and a well-defined area of cooperation where the costs that each country will incur and the benefits are well understood to reduce risks of disagreements in the future (Gaspar, Kolari and Hise 64). Regional integration requires planning before implementation to ensure that each country is satisfied with the results. Effective communication among these countries is essential in promoting a healthy relationship.
Gaspar, Julian, et al. Introduction to Global Business: Understanding the International Environment & Global Business Function. Cengage Learning, 2017.
Peng, Mike W. Global Business. Cengage Learning, 2013. Accessed May 14, 2018 https://books.google.co.ke/books?id=fcoaCgAAQBAJ&printsec=frontcover&dq=Global+Business&hl=en&sa=X&ved=0ahUKEwjS58yIj4fbAhXkdN8KHXRTAmAQ6AEIJzAA#v=onepage&q=Global%20Business&f=false