What are Regional Trade Agreements?  Agreements between member nations on lower barriers or free trade among themselves.  One example of a regional trade agreement is the one that the European Union and NAFTA have. 

This link will show you the different trade agreements that the EU has in force
http://rtais.wto.org/UI/PublicSearchByMemberResult.aspx?MemberCode=918&lang=1&redirect=1

These are some positive impacts of regional trade agreements:

The European Union is a unique economic and political partnership between 27 European countries that cover most of the continent.  This union was created after WWII.  The idea was to bring countries together to trade with one another so that they could achieve economic interdependence and to also avoid conflicts between them.  Some of the stages of economic interdependence are:

1.  free-trade area
2.  customs union
3.  common market
4.  economic union
5.  monetary union

This union has made sure that all members benefit from peace, stability, prosperity and has worked on building higher living standards. By removing border controls people have been able to travel freely all over the continent and are able to live and work abroad without any issues. The EU is working on simplifying regulations to make it easier for members to take complete advantage of the single market.  Larger markets are being created to provide freer trade under the customs unions and this helps to prevent any negative stagnant effects.  "Dynamic gains include economies of scale, greater competition, and a stimulus of investment." (Robert J. Carbaugh, International Economics, 13th edition, pg. 279)  By having a larger market the EU has been able to provide more efficient workers, machinery,and equipment for the market and the ability to use by-products more efficiently.

One good example, of dynamic effects of integration is the refrigerator industry which was covered by Germany, Italy and France and they supported a small number of manufacturers that only produced domestically.  These manufacturing companies produced less than 100,000 a year but after the EU was created  they were able to integrate and adopt the large-scale production methods which lowered the cost of the units and increased the amount of refrigerators produced to 850,000 annually for Italy.  This was possible because they were able to integrate the automated equipment.  Germany and France averaged about 570,000 and 290,000 units per year. 

One Negative impact is the EU promising his farmers a higher level of income and farmers producing high quantities of products like cheese, milk, butter, and meat which have had low consumption.  Surpluses have been purchased by the EU and sold overseas at very reduced prices.  In turn, this has brought opposition from farmers overseas.  By the EU exporting these goods at such a low price to other countries, poor farmers are faced with losses since they can't compete with these prices.

By having these problems with the farmers the EU decided to implement the Maastricht Treaty of 1991 which then they would form a monetary union for all eligible members of the EU which they started in 1999. By creating a monetary union they would implement a single currency which is the euro and the European Central Bank but before they could use the system all members had to converge their economic and monetary policies in order for all members to be at an equal stage. This means that they had to have price stability, low long-term interest rates, stable exchange rates, and sound public finances. Only 16 out of the 27 member states made the euro their official currency.

Another big issue which EU members is when one country's GDP falls it causes turmoil since they don't have a bailout system in place to help this particular member.  They are also afraid that if they implement a bailout system that many members will not have the incentive to work hard to keep their economy at the standard level that is required by all EU members.

Benefits and costs of the nations involved:

Optimum currency areas is when many countries share the same currency which enables to save on prices, less transaction costs, greater confidence for investors, and increased competition.  The option of having the same currency across the borders is that all members can benefit from the same rates everywhere they go instead of having to worry exchange rates. 

The EU's trading agreement can work in developing regions because they make sure that before they become members they work to bring their economy to the same stable position as that of all other members of the EU.  I believe that the EU system is more good than bad as long as they do implement a fund in which they can help when a country is in dire need and that they need to fix the problems with Farmer subsidies because it isn't fair to neighboring countries.


Member states of the EU (year of entry)

 Austria   (1995)
 Belgium   (1952)
 Bulgaria   (2007)
 Cyprus   (2004)
 Czech Republic   (2004)
 Denmark   (1973)
 Estonia   (2004)
 Finland   (1995)
 France   (1952) Germany   (1952)
 Greece   (1981)
 Hungary   (2004)
 Ireland   (1973)
 Italy   (1952)
 Latvia   (2004)
 Lithuania   (2004)
 Luxembourg   (1952)
 Malta   (2004)
 Netherlands   (1952)
 Poland   (2004)
 Portugal   (1986)
 Romania   (2007)
 Slovakia   (2004)
 Slovenia  (2004)
 Spain   (1986)
 Sweden   (1995)
 United Kingdom   (1973)

Candidate countries:
 Croatia
 Former Yugoslav Republic of Macedonia
 Iceland
 Montenegro
 Serbia
 Turkey


References:

http://europa.eu/index_en.htm

(Robert J. Carbaugh, International Economics, 13th edition)