What are the Advantages of Regional Economic Integration?

The healthy effects of such a regional economic integration are presumed to be as follows:

1. Since a regional common market obviously provides a much larger market than that offered by the domestic market of a single country, economies of scale, both internal and external, become possible with the widened size of the market.

2. Secondly, the large market so created would permit a hight degree of sophistication and specialisation of products conducive to furtherance of modern industrial development. Moreover, the possibility of specialisation for regional trade would encourage the flow of investment into industries which have a comparative cost advantage, so that gains from international trade would rise.

3. Apart from an increase in the volume of total trade as a result of such an integration, a favourable change in the cost and price structure may also be effected along with, the desirable change in the structure and composition of foreign trade.

4. Furthermore, this may facilitate the realisation of the optimum allocation of resources, and thus, lead to an increase in efficiency in production.

5. Above all, the increased possibilities of competition in a regional common market would ensure that all benefits accruing to the producers from the existence of a large market would be passed on to the consumer.

6. In fine, thus, there can be an increase in the general welfare due to better production and enchanced consumption, and a rise in real income generated by the overall growth and development.

In short, thus, it has been conceived that, as a factor in the development of the less developed countries, a regional common market is economically far superior to the relatively small national market sheltered behind a protectionist tariff wall.