Regional Economic Integration and Economic Cooperation

Analysis of the Monetary Systems and International Finance with Focus on China and Singapore


Institutional Affiliation

Analysis of the Monetary Systems and International Finance with Focus on China and Singapore

Regional Economic Integration and Economic Cooperation 

The Asian region is among the leading international economic powerhouses due to its economic potential and size with countries such as China and Singapore dominating the region. Nonetheless, the capacity constraints in various Asian nations and the diversity of the continent complicate the efforts to create a unified market in the Far East. Achieving success in Asia’s regional economic integration requires high commitment levels among the member countries in addition to the effective implementation of various initiatives to facilitate economic cooperation (Rillo & Cruz, 2016). I consider China and Singapore as significant players in the global and Asian economies due to their volumes of traded goods and investments in their local and foreign markets. For instance, China leads in the Asian continent, and its economy is the second largest in the world based on its nominal gross domestic product as an indicator of market performance. On the other hand, Singapore’s highly developed economy is among the most rapidly growing in the world, and this has allowed the country from a third-world nation into a developed country in about five decades. I also observe that variations scope and breadth exist in regional economic integration, and the economic integration in the East Asia region initially assumed a market-oriented cooperation process before transforming into an economic integration drive. 

My understanding is that a trade bloc refers to a form of an agreement between different governments that reduce or eliminate trade barriers to increase trade volumes among the member states. I have also learned that the trade blocs can exist as independent agreements between specific countries or form components of regional organizations. The trade blocs can further be categorized as monetary and economic unions, common markets, customs unions, free trade areas, and preferential trading areas. In Asia, the intergovernmental agreements have resulted in some regional trade agreements as well as the formation of the ASEAN trading bloc. I noted that China and Singapore are currently members of the Association of South-East Nations trading block alongside eight other countries in Southeast Asia. The primary objectives of ASEAN include the facilitation of sociocultural, educational, military, political, and economic integration as well as promoting intergovernmental cooperation in the region (Berman & Haque, 2015). The first stated aim of ASEAN is enhancing the competitiveness of the region in the international market as a production base by eliminating non-tariff and tariff barriers within the member states. The second aim of ASEAN is increasing the volume of FDI’s to the Southeast Asia nations. 

I believe that being member states of regional trading bloc has several advantages to the participating countries. One of the advantages that China and Singapore derive from joining the ASEAN trade bloc is the enhanced economies of scale that result in significant reductions in the costs of manufacturing and production. It occurs because the agreements between the member states facilitate mass production of various goods in addition to increasing the availability of affordable labour (Trigwell-Jones, 2015). Another important benefit from joining the trade bloc is that it has led to an increase in foreign direct investment into the two economies and expansion of their local markets. Furthermore, the foreign direct investments help in reducing the local manufacturing costs. Singapore and China also benefit from the trade blocs due to the increased competition as a result of the increased proximity of manufacturers from different countries. I believe that the enhanced competition is important because it encourages increased efficiencies in local business organizations and encourages the exchange of best practices between various firms. The elimination of tariffs due to multilateral agreements in the trade blocs helps in reducing the importation costs and lowering the costs of goods. The trade effects of joining the trade blocs allow the business organizations that use efficient production as a competitive advantage to flourish, and this helps in improving the local production standards in the long run. Lastly, I believe that a reduction in the costs of production and goods helps in stimulating consumption by consumers and enhancing market efficiency by reducing deadweight losses. 

However, joining a trading bloc also has several disadvantages to the participating countries. I consider one of the disadvantages of the trading blocs is to be that they may lead to the loss of sovereignty to the member countries in situations where political interests couple with the economic agreements such as in the European Union. The increased interdependence between participating countries may also disrupt regional trade in case of disasters or political instabilities in some of the members (Trigwell-Jones, 2015). Some of the advantages that Canada can derive from a customs union with Mexico and USA include increased volumes in exports and imports, reduction in prices of the imported commodities, and exchange in various technologies. The main disadvantage in joining such a union would be the creation of common trade policies that would affect Canada’s critical institutions such as the banking sector, agriculture, and telecommunications among others. 

The free trade agreements and economic unions share several similarities in the internal structures that facilitate trade among member nations, and one of the emphases in the two is the reduction or elimination of trade barriers. However, the main difference that exists between FTA and economic unions lies in how they approach non-treaty countries. The free trade area allows its member states to determine their tariff rates to non-member countries during importation while the economic unions require all its member states to adopt identical external tariffs when trading with non-treaty countries. Thus, Canada’s association with NAFTA will aid me in selling my products to Singapore and China by giving me the freedom to negotiate for favourable rates rather than being limited by the tariffs set by other countries. NAFTA will also benefit my company to import various goods from Singapore and China at reduced prices. 

Foreign Exchange and International Money Markets

Different countries boast of unique resources such as minerals, precious metals, timber, and fossil fuel that allow them to engage in international trade. I believe that importing and exporting activities are essential economic activities because they assist national economies in growing in addition to expanding the international markets. The economic growth and performance of any country depend on its ability to increase its exports and reduce the import volumes. According to Stewarts (2010), increasing exports and reducing imports helps countries in maintaining healthy economies as well as reducing their reliance on foreign countries for essential commodities. I believe that importation offers several benefits to individual consumers and local businesses. For example, importation helps in increasing the variety of products available to local consumers and reducing the prices of various commodities through the increased availability of goods. This occurs because most of the imported goods are cheaper in international markets. Additionally, importation helps in improving the quality of local products through the incorporation of the imported components of high quality. Importation also helps in reducing the deficits that could occur due to inadequate manufacturing activities in a country. On the other hand, exportation is also important because it increases foreign exchange earnings and increases employment opportunities in the country. 

However, importation and exportation also have several drawbacks that could have far-reaching consequences on the local economies. I believe that one disadvantage associated with importing is that it may increase the rates of unemployment due to the reduction in manufacturing and value-addition activities. The low prices of imported goods could also increase the rates of inflation and discourage local manufacturing due to the increased production costs. The inflation in import-dependent countries occurs because such countries spend much of their monies on buying goods from foreign nations. Such countries could be forced to print more money to increase local circulation thus losing the values of their currencies in the global financial markets. However, a weak currency is beneficial to the exporters because it makes the prices of the exported goods cheaper in the international markets. The weaker currencies also have the potential of increasing the volume of individuals visiting the affected countries thus benefiting the tourism sector. 

Another drawback of importation is that it may lead to the failure of local industries due to the substitution of domestically produced goods with imported products. I believe that a major disadvantage of exportation is that it results in the depletion of finite or non-renewable resources such as minerals, ores, and crude oil. My research on the importation and exportation activities reveals that the countries that depend on the exportation of such resources for the sustenance of their economies usually encounter financial hardships in the future. Inadequate value addition of raw materials for export also results in low earnings from foreign exchange and increased deficits during the importation of processed products. 

I understand the balance of trade as the difference in monetary value between the total imports and exports in a country over a specified duration. I believe that the countries that export more than they import from international markets record positive balance or trade surpluses while the countries that import more than they export report negative balances or trade deficits. Furthermore, I believe that long-term trade deficits have detrimental impacts on the economy because they increase the rates of unemployment and reduce the prices of commodities. As such, the manufacturing companies experience the worst effects of the trade deficits due to the competition that results from the imported goods and the inability to record sustained profits. 

The high exportation implies that Canada received a lot of US dollars in its local market during the period characterized by the inflation in the USA. As such, the weakening of the US dollar would affect the Canadian economy due to the amount of reserves in US dollars held by the country. I believe that the Canadian central bank and government would be under pressure to weaken the local currency to improve the competitiveness of local products pricewise. Additionally, The Canadian interest rates would also result because of the increased preferenc

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