International Economic Integration: Limits and Prospects

By Miroslav N. Jovanović | Go to book overview
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5

Integration Schemes

I INTRODUCTION

The founders of GATT recognized the importance of economic integration between countries. That process can have identical economic rationale as integration within a single country that has different regions. Hence, regional economic integration, according to the WTO (1995) does not pose an inherent threat to global integration. None the less, the GATT (Article XXIV) constrains the level of the common external tariff and other trade measures in customs unions. On the whole, these trade measures should not be higher or more restrictive than those of the member countries prior to the integration agreement. Between 1947 and 1995 a total of ninetyeight integration agreements had been notified to the GATT. Membership of those integration groups can be seen in Annex I. However, only six agreements were ‘cleared’ by the working party through the consensus principle. For others, including the ‘clearance’ of the Treaty of Rome that established the EEC in 1957 the result was inconclusive. One of the reasons why there was no definite agreement in the working party were the ambiguous effects of integration on nonmembers. Therefore, this inconclusive nature of the Treaty of Rome in this respect set the pattern that dominated nearly all future reviews of integration agreements notified under Article XXIV.

Intra-group trade has a rising long-term trend, at least in Europe and North America. That development, however, was not associated with a significant alteration in the relevance of extra-group trade in relation to total output in the two regions. In spite of various concerns, the WTO (1995) did not find conclusive evidence about the emergence of a ‘fortress’ mentality in integration arrangements. The conclusion was that regional integration was complementary to the multilateral trading system. Regional economic integration had an overall favourable impact on the pace of global economic integration. However, various NTBs pose an obstacle to deeper integration in the future.

The objective of this chapter is to provide no more than a brief reminder on international economic integration arrangements in the developed and

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