Regional economic integration can be viewed in terms of a hierarchy of arrangements which extend from the preferential tariff agreement to the free trade area, the customs union, the common market and, in the extreme case, the economic union. The latter is now frequently described as economic and monetary union.

Various economic benefits are said to arise from the removal of internal tariff and quota barriers to trade in goods between the partner economies, although some protection from import competition from third countries will remain. Further integration benefits arise from the removal of protective devices generally referred to as non-tariff barriers. Higher beneficial forms of integration would depend on the removal of internal obstacles to trade between the partners in services. A common market involves an attack on mainly government-inspired regulations which impede the free cross-frontier flow of services of production, that is, labour, professional persons, capital and business enterprise.

The highest form of economic integration is economic and monetary union. This does not just involve the removal of inter-state barriers to the free movement of goods and services, but also extends the integration process to monetary and fiscal matters. At a minimum such additional macroeconomic arrangements involve a system of fixed exchange rates between participating national currencies; at a maximum they imply the introduction of a single unified currency and national fiscal systems. Such an extension of integration carries with it additional economic benefits, as well as a further erosion of national economic sovereignty. The decision-making structures associated with the specific economic integration policies now in place in various parts of the world economy vary widely from highly centralized and administratively well-supported systems to those which exhibit considerable decentralization and minimal bureaucracy. Theorists of integration speculate that economic integration can spill over into political integration; the European Union is a classic case of the latter process at work

Dennis Swann