The Economics of International Integration, Second Edition

The Economics of International Integration, Second Edition

Miroslav N. Jovanović

The dissipating multilateral trading system and splintering in a number of trading blocs and arrangements has been one of the most important issues in international economics, particularly after the establishment of the World Trade Organisation in 1995 and especially during the Doha Round (2001-13). This book takes on those and new issues such as integration through spatially fragmented production and operation of supply chains. It also reviews various existing and emerging integration arrangements and their achievements. International economic integration deals are here to stay and evolve with variable successes in spite of advantages offered by the multilateral trading system.

Chapter 3: Theory of customs unions

Miroslav N. Jovanović

Subjects: economics and finance, international economics, regional economics, urban and regional studies, regional economics


Chapter 3 overviews issues related to customs unions and free trade areas, which are the most rigorously developed part of the theory of international economic integration. The analysis is carried out through static and dynamic approaches, as well as in partial and general equilibrium frameworks. Increased competition on a secured and enlarged market by means of integration, specialisation and returns to scale receives special treatment, as these are the most important dynamic effects. A discussion of adjustment costs suggests that they do not always represent a serious barrier to integration, especially in the medium and long run.

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