Integration

economic-dictionary

Integration is the process and result of keeping the parts of a whole together. It can be applicable in various fields, such as social, political and economic.

That is, integration is putting together various elements that are part of a common set. We can refer to groups of individuals or countries, for example.

Likewise, integration can occur in specific aspects, such as economics, where a unity in trade policies, for example, does not imply uniformity in other issues such as the administration of justice. In other words, that two countries eliminate their trade barriers does not mean that they have the same penal code.

It should be noted that the opposite of integration is exclusion and discrimination.

Types of integration

We can mainly identify the following types of integration:

  • Social integration: It means creating policies so that certain social groups or groups are more included in the country's economy. For example, the government can promote student loans to the best students in regions with the highest poverty rates.
  • Economic integration: It is the process of eliminating obstacles to trade between two or more countries. Its objective is to create broader economic spaces in which to take advantage of the advantages of international trade, such as increasing specialization or increased productivity. Thus, different modalities of this integration can be distinguished:
    • Preferential trade agreement: It consists of a tariff reduction on imports from member countries, but trade policies with third countries are set by each member country independently.
    • Free trade area: Member countries totally eliminate tariffs. Likewise, the independence in setting trade policy with third countries is maintained.
    • Customs union: This is a free trade area in which foreign trade policy is common.
    • Common market: The characteristics of the customs union are joined by the free transit of capital and labor.
    • Economic union: They are common markets in which macroeconomic and sectoral policies are harmonized.
    • Monetary union: It is an economic union with a common currency, so monetary policy is also harmonized.
  • Financial integration: It is a process by which the world's financial markets tend to be increasingly intertwined with each other.
  • Business integration: These are actions that a company takes as part of its business plan. Two types are distinguished:
    • Horizontal integration: It is a strategy that a company adopts when it seeks to offer its products or services in different markets. It can be executed through company purchase actions or mergers in the same sector.
    • Vertical integration: Companies enter into activities related to the production cycle of a good or service. Thus, they expand the number of processes they develop within a sector. For example, if a businessman is dedicated to trading coffee, which he buys from farmers, he could dare to plant his own hectare of coffee trees.

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