What level of integration has been achieved?
Countries can embark on an economic integration process to take advantage of being larger: scale economies, cost reductions, greater efficiency in projects, financial and economic stability, etc.
From a theoretic point of view, there are six stages or levels of integration, depending on the level of economic convergence achieved.
- Preferential trade area.
Customs tariffs between the countries participating in the project are reduced. - Free trade area.
Elimination of the tariffs due on all or part of the goods that circulate between the participating countries. - Customs union.
Establishment of common tariffs with respect to non-member countries and articulation of a common trade policy. - Common market.
The creation of regulations applicable to most of the goods and services and the enablement of free movement of goods, capital, persons and services. - Economic union.
The harmonisation of the different national economic policies: monetary, financial, tax, industrial, agricultural, etc. As regards monetary policy, this can lead to the creation of a common central bank and the adoption of a common currency, which would produce a monetary union. - Economic integration.
This is an economic space governed by common economic policy, which also requires an institutional organisation with effective powers.
The European Union has already passed the four initial levels of integration and is in the process of achieving economic union. Great steps forward have been taken in the area of monetary union, with the introduction of a common currency, the euro, and the application of a common monetary policy in a significant number of countries.