North American Economic Integration
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North American Economic Integration

Theory and Practice

Norris C. Clement, Gustavo del Castillo Vera, James Gerber, William A. Kerr, Alan J. MacFayden, Stanford Shedd, Eduardo Zepeda and Diana Alarcón

This highly accessible book explains the theoretical, historical and political background of the North American Free Trade Agreement (NAFTA), its impact and the debates surrounding its existence. In addition the authors provide a brief introduction to the theory of economic integration as well as a succinct overview of the evolution of the global economy, and the institutions that manage it, in the post World War II period.
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Chapter 2: International Integration: Theory and Practice

Norris C. Clement, Gustavo del Castillo Vera, James Gerber, William A. Kerr, Alan J. MacFayden, Stanford Shedd, Eduardo Zepeda and Diana Alarcón


Page 23  2. International Integration: Theory and Practice  This chapter has two main objectives: (1) to put the concept of international integration within the context of economic theory; and (2) to describe and provide insights  into the international institutions countries have put in place to regulate the process of international integration. Understanding the theoretical basis for economic  integration is important because, to a considerable extent, government initiatives regarding trade and other aspects of integration are influenced by theoretical arguments.  As with any change in government policy, changes to how nations interact with each other will involve trading off a set of benefits against costs. Theory can provide  insights into those benefits and costs. This chapter discusses the major theories of international trade and the insights they provide for policy makers.  International commercial relationships with other countries will impinge on a nation's sovereignty. To provide a commercial environment where firms are willing to invest  in trade­related activities requires rules for trade and other aspects of international commercial activity that trading nations accept. As these rules limit nations'  sovereignty, a large number of international organizations have been established to facilitate the difficult trade­offs between the need for a secure business environment  by those engaged in international commerce and the sovereignty concerns of nations. Of course, trade is not the only arena where international organizations impinge on  sovereignty. Political organizations such as the United Nations and military alliances such as the North Atlantic Treaty Organization (NATO) also affect sovereignty.  The international...

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