Market Integration
As defined by Cambridge Business English Dictionary (n.d.), market integration is a
condition wherein separate markets for a similar product is integrated into a single market. Also,
it is a characterized as an action to merge separate national economies into larger economic area.
Such integration would surely affect the conduct of business of every enterprise that could result
to an increase in their market efficiency. Moreover, it has various stages ranging from little
association between countries to complete integration. One good example of market integration
is free trade. As mentioned in the video, free trade is a trade agreement between nations that
allows people to buy foreign goods as freely as they can buy domestic goods. Also, it is
characterized as the absence of trade barriers like tariffs, subsidies, quotas and other restrictions.
Many countries have been optimizing free trade agreements with other nations. For instance, the
North Atlantic Free Trade Agreement involves the United States, Canada, and Mexico. Moreover,
numerical countries in Asia and Africa has been establishing the same agreement together with
their fellow nations.
Truly, free trade agreements clearly impose the concept of market integration. In addition, it
is somehow applied by countries with prosperous economy which leads to the connotation that
the implementation of such could actually bring wealth and economical growth and stability to a
particular nation. Undoubtedly, the imposition of free trade has displayed several economical gain
or benefits that prompt other nations to follow the same. Particularly, free trade allows to improve
the efficiency of trading activities between the producers and consumers as both parties benefit
from the elimination of trade barriers. As nations integrate, economic and political coordination
increases (Kenton, 2020). Moreover, there will be an increase in the availability of both domestic
and foreign goods that results to a greater purchasing power. Also, it leads to market expansion,
increased employment opportunities and stronger political ties. In line with this, multilateral trade
agreements actually improve efficiency, innovation and fairness (Boudreaux and Ghei,2018).
Enterprises tend to optimize the use of resources and adapt to a changing and globally
competitive market in order to ensure their growth and stability.
In order to balance the equation, there also lies various costs in abiding with such trade
agreements. Such policies could actually bring about massive job losses, increase predatory
pricing, and tax problems (Berman, 2018). Some goods might be cheaper to be purchased abroad
than to produce them domestically. With this, domestic producers would be greatly affected and
many employees could be terminated. If there would be no occurring trade restrictions, efficient
companies might be adversely affected by predatory pricing of foreign companies. A highly
influential foreign entity could actually take a monopoly position in a particular country. In line with
this, a state might encounter tax problems since multilateral agreements could limit their ability to
collect taxes from corporations. Furthermore, the absence of trade policies and regulations could
lead to major labor and environmental abuses (Robinson, 2019). Some companies could freely
choose to operate in a country with no strict labor and environmental rules in order to minimize
costs and maximize returns.
On the other hand, the concept of protectionism refers to government policies that restrict
international trade by imposing several trade restrictions in order to protect and promote domestic
goods. Truly, this concept is the complete opposite of free trade. Yet, protectionism is also related
to market integration since domestic corporations could also merge and create certain
recommendations and policies that facilitates their integration. Moreover, domestic market
integration promotes protectionism to ensure that domestic goods would not be unfavorably
affected by foreign goods. Protectionism is also widely practiced by several countries. For
instance, the Philippines has been imposing certain tariff rates for several foreign goods alongside
with its neighboring countries like Japan, South Korea and India. Furthermore, larger tariff rates
actually originate from developing countries while developed countries has no or low tariff
impositions (Hansen, 2019).
Although there has been increased awareness and call for trade liberalization, many
countries still apply tariffs and other trade protective measures for certain reasons or benefits
attained from it. Primarily, it provides more growth opportunities and jobs, lower imports and
allows a country to have a higher GDP (Longley, 2018.) Emerging countries are protected from
foreign competitions due to low demand for imports and they enjoy local industrial growth. Such
policies also increase the demand for labor and thus providing more job opportunities for domestic
workers. Due to increased rates in domestic production, the GDP of a country also boosts. In
addition, such restrictions could also be a source of revenue for the government. However, the
said advantages are presumed to be short-term and the costs of such policies actually declines
one’s economic growth over time. Some disadvantages include decline in the quality of domestic
products, less innovation and decline in overall economic growth (Amadeo, 2020). The
disadvantages provided is like a domino effect. First, domestic corporations would be complacent
and have no or little interest in product innovation. As a result, the quality of local products would
decline and even turn to be more expensive over time. In the end, the economy of a country will
soon decline as well.
On a local context, the Philippines is also a protectionist country who applies different
trade restrictions on foreign goods. Based on the pros and cons stated above, the country is
surely encountering the same. Truly, there is increased demand in local products since it cheaper
than foreign goods. Also, local corporations provide many job opportunities although some of
them are only contractually based. Furthermore, the GDP of our country has also increased and
some of our local products are even demanded globally. However, our country is only reaping
short term benefits as a result of the such implementation. On a narrow perspective, people might
think that our economy is somewhat growing just based on some numerical measures. Also, many
underprivileged Filipinos have expressed that they do not feel any economic growth at all despite
such promising values regarding economic growth. This notation calls for the government to pay
attention at the bigger picture. A lot of companies have been applying sustainability measures
since they want to ensure long term benefits and not just the maximization of profit on a short
period of time. So, the government is also opted to do the same by taking into consideration the
things that could really provide long-term benefits for every Filipino. Regarding this matter, I
believe that our country has been implementing protectionism since we might not be ready yet to
face global competitions or other risks. So, the government might have been playing safe
regarding this matter. Nevertheless, there should be steps or plan of action. There will always be
risks in life and it is important to be a calculated risk taker. No matter what, the risk should actually
be taken. On my opinion, I am convinced that the Philippines should follow the same path provided
that it is equipped and ready for such. It reminds me of the Filipino saying which states “Ang ukol
kay Juan ay maaring hindi ukol kay Pedro.” Truly, countries have different economic structures
and capabilities so a thing that worked well for the other could not be effective for the other. The
application of free trade also imposes various costs so the country must be prepared to bear all
of it in order to reap the long-term benefits. Once the country adopted the free trade policy, the
government could make other rules and regulations regarding the protection of domestic products
or have a wider promotion of it globally to ensure that it would not be left behind. Lastly, if ever
the country has decided to follow the same, the government and its people must be aware that
changes brought by it would not be quick and would entail a lot of hope, patience and sacrifice.
References:
Amadeo, K. (2020, March 23). Trade Protectionism Methods With Examples, Pros, and Cons.
Retrieved April 24, 2020, from https://www.thebalance.com/what-is-trade-protectionism3305896
Berman, Craig. "The Disadvantages of Free Trade" bizfluent.com, https://bizfluent.com/about5467816-disadvantages-trade.html. 24 April 2020.
Boudreaux, D., & Ghei, N. (2018, May 23). The Benefits of Free Trade: Addressing Key Myths.
Retrieved April 24, 2020, from https://www.mercatus.org/publications/trade-andimmigration/benefits-free-trade-addressing-key-myths
Hansen, S. (2019, September 5). Which Countries Have the Highest Tariffs? Retrieved April 24,
2020, from https://www.investopedia.com/ask/answers/040115/which-countries-havehighest-tariffs.asp
Kenton, W. (2020, January 29). Economic Integration. Retrieved April 24, 2020, from
https://www.investopedia.com/terms/e/economic-integration.asp
Longley, R. (2018, December 3). Understanding the Pros and Cons of Protectionism. Retrieved
April 24, 2020, from https://www.thoughtco.com/protectionism-definition-and-examples4571027
Market Integration. (n.d.). Retrieved April 24, 2020, from
https://dictionary.cambridge.org/us/dictionary/english/market-integration
Robinson, N. (2019, August 27). Pros and Cons of Free Trade. Retrieved April 24, 2020, from
https://bizfluent.com/about-5467816-disadvantages-trade.html