Answer to Question #242310 in Macroeconomics for vtg

Question

a) Define the following terms

1.Economic integration

2.economic growth

3.Economic development

B).Describe any two types of economic integration except a free trade area

C)Discuss the advantages and disadvantages of a free trade area as a form of economic integration .

D) Discuss advantages and disadvantages of SADC

Answer 1

a)

1. Economic integration is a pact between countries that usually entails the removal or lowering of trade barriers as well as the coordination of monetary and fiscal policies. Economic integration attempts to lower consumer and producer costs while also increasing commerce between the nations included in the agreement. Economic integration is often known as regional integration since it frequently occurs between neighboring countries.

2. Economic growth is an increase in the production of economic goods and services, compared from one period of time to another. Economic growth can be aided by increases in capital goods, labor force, technology, and human capital. Economic growth is generally assessed in terms of an increase in the aggregated market value of new products and services produced, as measured by GDP estimates.

3. Economic development is the transformation of low-income, simple country economies into contemporary industrial economies. Although it is often used interchangeably with the phrase "economic growth," it is more commonly used to denote a change in a country's economy that includes both qualitative and quantitative gains.

B) Custom union. Sets common external tariffs for member countries, suggesting that the same tariffs are applied to third countries; this results in a common trade system. Custom unions are especially beneficial for leveling the playing field and addressing the issue of re-exports (using preferential tariffs in one country to enter another country).

Common market. Within member countries, services and capital are free to move, increasing scale economies and comparative advantages. Each national market, however, has its own set of rules, such as product requirements.

C) Advantages

Increased efficiency - A free trade area's benefit is that it stimulates competition, which boosts a country's efficiency as it strives to keep up with its competitors. As a result, products and services improve in quality while costing less.

Specialization of countries - Countries will tend to manufacture the products or goods that they are most efficient at when there is fierce competition. Profit maximization is achieved by making efficient use of resources.

Disadvantages

Intellectual property is under threat. When imports are free to trade, domestic producers can often replicate the products and sell them as knockoffs without fear of legal ramifications. As a result, there are no protections for exporting enterprises unless the FTA contains measures for intellectual property legislation and enforcement.

Unhealthy working conditions - With a free trade zone, outsourcing jobs to poor countries could become a trend. Workers may be forced to work in unhealthy and poor work environments since many countries lack labor protection legislation.

D) Advantages

Liberalization of some priority service sectors based on the three organizations' existing programs.

Development of solid infrastructure programs aimed at consolidating the regional market through interconnection of all forms of transportation and boosting competitiveness by ensuring appropriate supplies of essential commodities.

Disadvantages

In the Southern African Development Community (SADC), poverty and underdevelopment remain formidable obstacles to social and human progress. According to the International Council on Social Welfare, over half of the population lives below the international poverty line of $1 per day. Poverty in the SADC is exacerbated by a number of factors, including high levels of disease, particularly HIV and AIDS, malaria, and tuberculosis; social and civil conflict; natural disasters, such as recurrent droughts and floods that erode food security; unemployment; and low industrial growth and productivity, which is exacerbated by high levels of skilled labor migration out of the region.