An Introduction to the Globalization Debate

There are four different types and levels of economic integration. One of the most popular in the post-globalization era and generally perceived of as the first step towards eventual regionalization or the formation of a regional economic bloc is free trade agreements (Held and McGrew, 2003). As Hill (2007) clarifies, within the context of free trade agreements, all types of internal barriers to trade, or the movement of goods and services between member countries, is removed. While in FTAs member country set their own trade and economic policies with non-members, policies towards members are determined by the agreement in question. As far as the impact upon business and market relations is concerned, it is important to clarify that the said level of integration has tremendous benefits for member states and businesses within as it effectively expands the market. At the same time, competition over markets is intensified and, needless to say, if the member states in question are unequal, this can be a disadvantage. In simpler terms, within the context of NAFTA, Mexican businesses have to compete with U.S. ones over both the regional and the domestic markets without the protection they were once afforded (within the home market) by tariffs, quotas, and subsidies.
Custom Unions are a second type and level of integration. Custom union agreements replicate all of the characteristics of FTA’s but take integration one step further through the adoption of common policies towards non-member states. The European Union has its genesis in this type of integration. Taking the concept of economic integration characteristic of customs unions one step further, Common Markets allow the free movement of both labor and capital across national borders. Post-1992 EU is an example of this type of economic integration.
Economic Unions, as in post-2002 European Union, constitutes a deep form of economic integration and benefits for member states are quite substantial. Economic Unions possess all the features of Common Markets but are further characterized by economic policy harmonization.