Overview of regionalization
A person tends to relate better with the place he or she is from. The region or communities one is involved creates the region he or she is in. the benefits accrued from the region, whether goods or services, are shared by the dwellers of the region. In addition to sharing the physical attributes of the place, they share their culture and religion (gtz, 2011). The varied number of regions offer different levels of benefits hence the need to form a bigger organize region through integration to cater for all the parties needs. There however arise issues that such regional parties face that may involve a different interests as well as confliction with other present regional groups.
Regionalization
Regionalization is the process involved in the formation of regions. The impact of regional integration is quite diverse, in relation to its economic impact. The markets in the various international states have been joined together from their various markets. The exports in the countries receive a drastic growth. Another impact is the increased importance of trade agreements established, the Regional Integration Agreements (RIA) is formed by the participating countries. The agreement may range from Free Trade Area that minimizes the barriers incurred during trading to the formation of unified currency. There is a sense of openness and growth in the participating countries, this creates a lee way for direct investment to a country.
There is a unification of currencies brings about trade, a reduction in cost for an international transaction and it reduces the aspect of a change in the exchange rates in the member states. An integrated regional trade enhances the participating countries economic statue creating a sense of minimized regression. The political foundations of the countries have been stabilized and help to create a stable trade.
Impact of Regional Integration
There are several challenges that impact the regional economic integration; there is a massive lack of expertise in the aspects of the integration, this consequently leads to poor transactions being put across by the available workers as well as a back log of work (Licandro, 2004). The level of infrastructure that the countries face is poor leading to lack of the relevant expertise to handle the work allocated. The time spend by the trucks when crossing the borders is long and creates an obstacle, this eats into the time that it should be sent to the destination required as well as spoilt goods. There is no enough finance by the participating countries to finance their activities successfully.
The interests posed by the national country as well as the international partners may vary hence leading to a conflict in interest. There are also several groupings whose activities may hinder the activity of other trade activities in place. The mandate of some regional trade organizations are not clear, this leads to conflicting expectations by the participating countries. Some countries tend to develop a protectionist attitude, leading to a bumpy trade involvement.
Political and Economic arguments for Regional Integrations
There are various arguments that have been advanced in relation to the political and economic integration of a region. A case in instance is the “new economic geography” which predicts that in this scheme possesses a disadvantage when a comparison is made in relation to the global economy (Bank, 2011). It further states that will always be a disadvantaged party when compared to the other party involved, this will in effect be heightened by the agglomeration economics, whence there will be an industrial concentration in the benefitting country at the disadvantage of the other party involved. Another key argument in the regional integration is the advancing economies of scale. The joining of economies of countries creates a bigger market, attracts more suppliers as well as creating favorable opportunities for the specialization of the organizations with reduction of the costs (Draper, 2011). It is based on the liberalization and openness it creates. In relation to a political basis, there can neither be a strong foundation nor a social and economic aspect. A political view is that it is necessary for the cooperation with the participating members.
The NAFTA Trade Agreement
The impact of the NAFTA trade agreement between Canada and North America are; Canada’s NAFTA export has received an increase in relation to the motor equipments, machinery and industrial products. The Imports have similarly increased in the past 5 years, this is more so in relation to machinery and equipments (International, 2011). The imports hit the 69% mark in 1998. There has been a benefit accrued to the market in Mexico. This has led to an expanded market where initially due to the financial crisis there were changes made to the economy.
The level of investment in Canada has increased by a margin of 54% from 1993. Several investors have come to the market, this benefit for the Canadian market. The trade in services has considerably improved to 12.4% of the whole machinery of Canada. The services involved are at a heightened this is another benefit it has acquired due to the Mexican trade involvement.
The market liberalization Mexico when one considers energy, banking, telecommunication and other aspects have formed chances for the exporters in the Canadian market. The Mexican economy grows with the goods and services provided by the market in Canada. The NAFTA has contributed to the advancement of the FDI in Canada and Mexico its investment has increased to 2.2% in the year 1998. The investment was more so in mining, banking and telecommunication.
Bibliography
Bank, W. (2011). Policy Brief: Meeting the Challenges of Regional Integration, Intra-African Trade and Economic Growth in Africa. Retrieved May 10, 2011, from http://siteresources.worldbank.org/EXTPARTNERSHIPS/Resources/PolicyBrief-RegionalIntegration.pdf Draper, P. (2011, March 1). Rethinking the (European) foundations of sub-Saharan African regional economic integration. Retrieved May 10, 2011, from http://www.voxeu.org/index.php?q=node/6161
Gtz. (2011). Regionalization. Retrieved May 10, 2011, from http://www.gtz.de/en/themen/politische-reformen/1680.htm
International. (2011). The NAFTA’s Impact. Retrieved May 10, 2011, from http://www.international.gc.ca/trade-agreements-accords-commerciaux/agr-acc/nafta-alena/nafta5_section04.aspx?lang=en
Licandro, O. (2004, September). The Impact of Regional Integration on Economic Convergence and Growth. Retrieved May 10th, 2011, from http://www.eui.eu/Personal/Licandro/IADB2.pdf
Sarbo, D. N. (May 2010). The Case of the Intergovernmental Authority on Development. The Challenges of Regional Integration in Africa , 55, 56, 57.
