Disadvantages/demerits of economic integration
- Loss of sovereignty; Members of economic unions typically are required to adhere to rules on trade, monetary policy, and fiscal policies established by an unelected external policymaking bod
- Diversion of trade; That is, trade can be diverted from nonmembers to members, even if it is economically detrimental for the member state.
- Employment shifts and reductions. Economic integration can cause companies to move their production operations to areas within the economic union that have cheaper labour prices. Conversely, employees may move to areas with better wages and employment opportunities.
- Difficult in managing coordinate monetary and fiscal policies
- Challenges in controlling external trade and production units
- Elimination of central banks
- Higher tariffs and reduced free trade due to protectionism
- Loss of customs revenues.
- May result in unfair distribution of gains. Due to free movement of goods and services which sometimes move in one direction
- Leads to consumption of low quality goods from member countries
- Leads to surplus output due to limited market due to production similar goods
- Sabotage and foreign influence like IMF and world bank that undermine integration
CATEGORIES Economics
TAGS Dr. Bbosa Science
