As 1992 begins, regional economic integration continues to accelerate, the General Agreement on Tariff and Trade (GATT) continues to flounder, and Asia continues to set the pace in economic growth. A continuation of these trends could result in a more economically compartmentalized world by 2000. Such an outcome, however, is not certain.
There are five levels of regional integration, the first of which is the formation of a free-trade area, and the second of which is the evolution of the free-trade area into a customs union. Beyond the customs union, the third level of integration is the common market. The common market, generally speaking, describes the pre-1992 level of integration in the European Community (EC). The fourth level of integration is economic union. This is the level of integration which was initiated in the EC on 1 January 1992. The fifth level of integration is political union. Political union describes the integration of the states in the United States. Political union is also the ultimate goal of the EC.
Each successive level of regional integration involves a greater degree of unified and common action. At the lowest level, the free-trade area, tariffs are eliminated on the trade between the member countries. At the next level, the customs union, common external tariffs are applied to all trade between the member countries and non member countries. The third level, the common market, moves one step further along, and permits the free flow of the factors of production among member countries. At the fourth level, economic union, monetary and fiscal harmonization among member countries is added to the common market system. The final level, political union, involves the creation of a single government over all member countries, and the loss of national identity for the individual member states of the union.
A far-ranging free trade agreement was negotiated between Canada and the United States i...