Welcome! In our economics class today, we will be looking at the topic “Economic Integration”. Do have a pleasant moment studying with us!

Lesson Note

Subject: Lesson Note

Topic: Economic Integration
Learning Objectives: By the end of the lesson, the learners should be able to:

  1. Define the term Economic Integration;
  2. Mention and explain the types of Economic Integration;
  3. State the advantages of economic integration;
  4. Identify the disadvantages of economic integration.


Economic Integration in Africa

Economic integration may be defined as a form of International co-operation among nations to Foster their economic interests. In other words, it is the deliberate act of government to pool their economic resources together in order to achieve a greater efficiency in the production of goods and services for the social and economic welfare of their countries. Countries with common interests form themselves into an organisation whose major objectives are to remove trade barriers and other obstacles that reduce the free flow of goods and services between them. A good example of an economic integration in Africa is the Economic Community of West African States (ECOWAS).

Types of regional economic integration

i. Free trade area: Free trade area is the type of integration in which member countries agree to remove all restrictions to trade among them. Tariffs, quotas, bans, etc are not imposed on goods coming from or going to member nations. There exist a common interest tariff policy among member nations. However, each country is free to have its own tariff policy as regards commodities from countries outside the free trade area.
ii. Common market: Common market also known as Economic community, is a form of co-operation in which there is a common internal and external tariff policy. There is free mobility of labour and capital between member states. That is, there is free movement of goods, services, capital and labour. A common market harmonises taxation, social and economic policies. A common market has its own budget. A good example of common market is the European Economic Community (EEC).
iii. Economic union: Economic union is a type of integration which takes the form of total integration of the member countries. It is aimed at harmonising the social, economic, industrial, commercial and technological policies of member nations. Furthermore, it involves the unification of member nations, monetary and fiscal policies. A good example of economic union is Economic Community of West African States (ECOWAS).
iv. Customs union: Customs union is an agreement among nations to eliminate trade barriers such as tariffs, quotas, etc among themselves or members and to adopt common barriers to imports from non-members countries.

Characteristics Of Customs Union

a. Tarrifs are abolished
b. Each member country is given free hand to maintain its custom duties and tariffs against non-member countries.
c. All track restrictions are abolished.
d. The members may agree on common custom duties and tariffs against any non-member country.

Advantages of customs union

i. It enhances good welfare for the citizens.
ii. It improves efficiency and stimulation of faster economic development.
iii. It results in lower cost per unit due to internal economies reaped by producing for a large market.
iv. There is a larger internal market for members and increased trading activities between member countries.

Disadvantages Of Customs Union

i. There may be possible death of some industries resulting in some degree of frictional unemployment.
ii. There may be a loss of revenue that would have accrued as a result of abolition of tariffs.

Benefits or Advantages of Economic Integration

The ways in which West African countries would benefit from economic integration are:
i. The enlarged market will encourage large scale production.
ii. Efficiency generated as a result of economic integration will be utilised in production units.
iii. There will be greater resources mobility achievement.
iv. The countries will benefit from specialisation in some areas of production.
v. Job opportunities will be created in the process.
vi. A wide range of economic activities will improve the quality of life of the people.
vii. There will be stimulation of faster economic development in the region

Problems or Disadvantages of Economic Integration

i. Fear and suspicion of domination: Uneven development among West African nations creates fear and suspicions of domination.
ii. Differences in economic and political ideology: There are differences in economic and political ideology which delay decision making process.
iii. Fiscal and Monetary differences: There are fiscal and monetary differences among the nations in West Africa.
iv. Inadequate infrastructural facilities: Inadequate infrastructural facilities such as roads and telecommunication are one of the major problems.
v. Political instability: Political instability in the region has slowed down the pace of economic integration.
vi. Inadequate Capital: There is inadequacy of capital within the region.
vii. Language barrier: Language barrier within the region also affects economic integration.

Done studying? See all previous lessons on Economics

  1. What do you understand by the term Economic Integration?
  2. Mention and explain the types of Economic Integration.
  3. What is custom union?
  4. What are the characteristics of custom union?
  5. State the advantages and disadvantages of custom union.
  6. State the advantages of economic integration.
  7. Identify the disadvantages of economic integration.

Questions answered correctly? Bravo!!

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