Economic Integration and Interdependencies

Economic Integration and Interdependencies

International trade promotes interdependencies since nations while acquiring what they lack and export what they have in surplus. Conventionally, nations were mostly limited to their national market, while external markets were protected by high tariffs and transportation costs. Low trade levels involved low levels of interdependency and economic efficiency. Through globalization a decline in the relative costs of many commodities, parts, and finished goods, took place. This is supported by lower transport costs, the exploitation of comparative advantages, a reduction in tariffs and larger consumer markets, expanding economies of scale.

Globalization underlines a decreasing impact of boundaries in the geography of international trade, in proportion to the level of interdependency. Economic integration processes, notably free-trade agreements, have established common tariff policies among groups of nations (such as G1 and G2) having a high level of interdependency. Multilateral agreements have also helped in establishing an increasingly deregulated global trading environment.