The main reason for governments to pursue trade liberalization is to attain better and superior economic growth and development in the global economy. Today, globalization has resulted in the openness of national economies in both internal and external dimensions, and it has created a thoroughly competitive environment in which only strong and efficient businesses will have a chance to survive.
Countries try to achieve a competitive advantage in the global market through regionalism to solve commercial and economic issues on a regional scale.
As a result, for developing countries that are not ready to join the international free market, regionalism could be the most effective strategy to progressively open their national economies and integrate them into the global economy.
The formation of regional unions is driven by an interest for economic cooperation among a group of countries in a certain geographical area. Initial indicators of this are the signing of preferential trade agreements (PTAs) and the expansion of trade and investment between them, followed by the development of an economic union.
Preferential trade agreements are one of the most fundamental levels and types of regional trade agreements. Participants in such agreements decrease trade obstacles, including tariffs and non-tariff barriers connected to a portion of each other’s trade.
Countries are moving toward “free trade agreements ” accords, which are more advanced than “preferential trade” deals. Following these two steps is the establishment of a customs union, in which countries adopt standard trade policies in addition to reducing trade obstacles. Other types of regional cooperation may be categorized as the development of a common market, and at the greatest level of economic cooperation, the establishment of an “Economic Union” amongst the members in order to unify the financial-industrial policies and Transportation and as well as form a single market among the involved countries.