Regional Paper

Regional integration is a process in which states enter into a supranational regional organization in order to increase regional cooperation and diffuse regional tension (Wikipedia, 2008). Agreements in regional integration can be made to reduce, and ultimately remove, tariff and non-tariff barriers to the free flow of goods, services, and factors of production between countries (Hill, 2004)

This paper will analyze the role of regional integration play in promoting global business. Discuss the advantages and the disadvantages of regional integration. In addition, compare and contrast the economic development stages of countries within a chose region and the effect of the economic development in global business. The geographical region that will be analyzed will be North American Free Trade Agreement (NAFTA).

The North American Free Trade Agreement (NAFTA) is an agreement between the United States, Canada and Mexico that eliminates most tariffs on products traded between the three countries. Since it has been in effect in January 1, 1994, (NAFTA) has been a major force in increasing the agricultural trade among the three countries and it is the largest trade bloc in the world in terms of combined gross domestic product (GDP) of its members.

Since implemented, the overall trade between the United States and Mexico has increased by 149 percent and the percentage of increase of trade between the United States and Canada has been 112 percent. In addition, trades between these three countries have improved themselves over $333.8 billion throughout the existence of the unification (Kroll, 2005).

The advantage of regional integration is unrestricted free trade and open trade. This allows countries to focus in the production of goods and services that they can produce more efficiently. It helps economies grow, creates jobs, and provides great opportunities for international trade and investments. Free and open trade helps to lower the costs of production and therefore reduces the prices of goods and services. In addition, linking neighboring economies and making them increasingly dependent on each other creates incentives for political cooperation between the neighboring states and reduces the potential for violent conflict. This can increase the regions political weight in the world.

Regional integration involves sacrifices and losses. One or more nations may benefit from the move, but other nations may suffer as a result. National sovereignty is also a major concern for most nations considering integration. Concerns about national sovereignty arise because close economic integration demands that countries give up some degree of their control over certain policy issues, such as monetary, trade, and fiscal policies (Hill, 2004). Another disadvantage or concern is that high cost domestic producers are replaced by low-cost producers, and that lower-cost external suppliers will be replaced by higher-cost suppliers.

United States is a developed country, which is supported by rich natural resources, high productivity and a well-developed infrastructure. Canada possesses a diverse developed economy. It also relies on its natural resources and operates particularly with U.S. On the other hand, Mexico is a developing country; it has set up itself as an upper middle income country.

US and Canada are part of group of 8 (G8) but Mexico is not a part of G8. On the basis of economic developments, United States can be ranked at the top among Canada and Mexico stands at the last position. In 1998, Canadian growth development rate (GDP) was $29, 300 per capita compared with $36, 500 of the U.S