What are the economic and political arguments for regional economic integration?

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What are the economic and political arguments for regional economic integration? Given these arguments, why don't we see more integration in the world economy?

Sep 4th, 2015

Thank you for the opportunity to help you with your question!

 Based on the theory of integration, the real economic argument is the trade diversion.

That means the third countries which might have lower opportunity cost than the member countries are excluded by the import tariffs. The consumer surplus will decrease because of the integration. But counter argument is that the trade creation will exceed the trade diversion as we have seen in the case of the European integration and NAFTA.
The political argument is that it is based mainly on geography. The members countries have to be neighboring countries. But there are many countries which have the main trade partners so far away. And many neighboring countries have border disputes.ASEAN for example, has been integrated because of the political factor. But at the beginning the intra-trade between them was minimal. It has been taken for decades until the PTA(partial trade agreement) could begin. Until now the intra-trade in the ASEAN 10 is still less than 50%, compared to 80% in Europe.

Politically and economically infeasible.Bilateral free trade agreement is used instead.

Despite the strong economic and political arguments for integration, it has never been easy to achieve (on a meaningful level).  There are two main reasons for this.  First, although economic integration benefits the majority, it has its costs.  While a set of nations as a whole may benefit significantly from a regional free trade agreement, certain groups may loose.  The second impediment to integration arises from concerns over national sovereignty.

Please let me know if you need any clarification for the doubts. I'm always happy to answer your questions. Looking forward to help you again. thank you. :)
Sep 4th, 2015

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