Integration
Integration is the unification of economic policies between different states, through the partial or complete abolition of tariff and non-tariff restrictions on trade.
The trade-stimulation effects intended using economic integration are part of the contemporary economic Theory of the Second Best: where, in theory, the best option is free trade, with free competition and no trade barriers whatsoever. Free trade is treated as an idealistic option. Although realized within certain developed states, economic integration has been thought of as the "second best" option for global trade where barriers to complete free trade exist.
Economic integration is meant to lead to lower prices for distributors and consumers to increase the level of welfare while increasing the economic productivity of the states.
There are economical as well as political reasons why nations pursue economic integration. The economic rationale for increasing trade between member states of economic unions rests on the supposed productivity gains from integration. This is one of the reasons for the development of economic integration on a global scale, a phenomenon now realized in continental economic blocs such as ASEAN, NAFTA, USAN, the European Union, AfCFTA, and the Eurasian Economic Union; and proposed for intercontinental economic blocks, such as the Comprehensive Economic Partnership for East Asia and the Transatlantic Free Trade Area.
Comparative advantage refers to the ability of a person or a country to produce a particular good or service at a lower marginal and opportunity cost over another. In his 1817 book On the Principles of Political Economy and Taxation, David Ricardo first described comparative advantage in an example involving England and Portugal. In Portugal, it is possible to produce wine and cloth with less labor than it would take to produce the exact quantities in England. However, the two countries relative costs of producing those two goods are different. It is tough to produce wine in England and only moderately difficult to produce cloth. Both are easy to produce in Portugal. Therefore, while it is cheaper to produce cloth in Portugal than in England, it is cheaper still for Portugal to produce excess wine and trade that for English cloth. Conversely, England benefited from this trade because its cost of producing cloth had not changed, but it could now get wine at a lower price, closer to the cost of cloth. The conclusion is that each country can gain by specializing in the good with a comparative advantage and trading that good for the other [Balassa, p. 18].
Balassa, В. (1967). Trade Creation and Trade Diversion in the European Common Market. The Economic Journal. No. 305. C. 1-21. Oxford: Oxford University Press.
Dalimov R.T. (2008). Modeling international economic integration: an oscillation theory approach. Tashkent: Department of Economics, National University of Uzbekistan.