To what extent is the Economic Integration? What is difference between free trade area and economic union? An example.

17 Oct 2014

Economic integration consists of six levels, namely (1) Preferential Treatment Agreement, (2) Free Trade, (3) Customs Union, (4) Common Market, (5) Economic Union and (6) Politial Union.

The difference between the free trade area and economic union is that the free trade area is a kind of light economic integration established to reduce or eliminate import duty and non-tariff barrier in order to promote trade. Economic Union is a kind of profound economic integration accruing to the reduction or elimination of import duties and non-tariff barriers such as the imposition on import duty at the same rate as import products from the third countries into the region, free circulation of production means including goods, services, labor forces, capital and standard harmonization and certificate issuance, currency policy, taxation, social and law. For example, after the establishment of the Preferential Trade Agreement in 1977, providing voluntary preferences for 71 items accruing to 12647 items in 1986, the ASEAN integration becomes more profound through the establishment of free trade area in 1992, eliminating import duties of most products and non-tariff barrier of importation with the aim of creating the ASEAN Economic Community in 2015.

European Union Economic Integration is very profound because apart from the elimination of import duty and non-tariff barrier of importation, EU carries out the same import duty policy with respect to the products imported from outside the region, currency policy, and taxation such as common currency (Euro), allowing free circulation of goods, services, labor forces, and capital as well as standard harmonization, procedures, formalities and others.  

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