International economic integration

Economic integration is one component of international integration (separately described) and may be defined as the abolition of discrimination between economic units belonging to different national states. The economic significance of national borders is that they introduce discontinuities, whether in trade, in flows of factors of production or in general economic policies, etc. It is customary to distinguish various states of the economic integration process according to the kind of discrimination removed:

1. Free trade area, which implies the removal of quantitative restrictions and customs tariffs.

2. Customs union, which unifies the tariff of the countries within the area against outsiders.

3. Common market, where all restrictions on factor movements within the area are abolished.

4. Economic union, where economic, monetary, fiscal, social and counter-cyclical policies are to some extent harmonized.

5. Supranational union, where the respective governments abandon completely their sovereignty over the policies listed.