×

Fill out the brief form below for access to the free report.

Economic Integration: What is It?

North American supply chains that are interconnected have emerged, strengthening the ability for all three countries to trade and invest with each other

Article by Nicholas Saliba November 15, 2016 //   3 minute read

At the Bush Institute, we believe that free trade and economic integration has resulted in economic prosperity throughout the continent by making commercial goods more affordable.  It has also helped sustain growth for goods and services, employment, and productivity in all three North American countries.  

But, what is economic integration?

On January 1, 1994, the North American Free Trade Agreement (NAFTA) between the United States, Canada, and Mexico created the largest free-trade region in the world. Since then, interconnected supply chains have emerged across North America, strengthening the ability for all three countries to trade and invest with each other, as well as with an increasingly competitive world market. 

Economic integration between countries or regions can take many forms, but it usually involves the reduction or elimination of trade barriers. In cases of multiple interconnections, it involves the coordination of monetary or fiscal policies and a high degree of political union. The aim of economic integration is to reduce costs for both producers and consumers and increase trade and investment between the participating member economies. 

What does NAFTA have to do with economic integration? 

Since 1994, the North American Free Trade Agreement (NAFTA) has eliminated most tariffs on trade within North America, while still allowing all three countries to maintain sovereignty and control of monetary and fiscal policy. In the new integration section of the Bush Institute Scorecard, we measure the impact of integration on the growth, prosperity and competitiveness of the North American partners. To measure integration, we analyze data for trade in goods and services and foreign direct investment, broken down by partner and as a percentage of the reporting country’s GDP. To measure the economic benefits of NAFTA integration, we analyze growth in GDP, GDP per capita, GDP per hour worked, total employment, private employment, volume of industrial production, and hourly earnings in manufacturing.

Openness to trade and integration has generated economic prosperity throughout the continent by way of more affordable commercial goods and sustained growth in output, employment, and productivity in all three North American countries. Despite rhetoric to the contrary, now is the time to reinforce our North American bond, not dissolve it.

Explore the updated Bush Institute Scorecard here.