Economic sciences/2.Foreign economic activity

Ph.D., Assistant Professor Zhylenko K. M.,

St. Bogomolova J. A.

Dniprovskyi national University by Oles Honchar, Ukraine

MODERN FORMS AND DETERMINANTS OF ECONOMIC INTEGRATION

Increasingly intensive processes of integration and internationalization characterize the global economy. Integration is a form of internationalization of economic life, an objective process of interweaving national economies and conducting a coordinated economic policy at the national and international levels in various forms: free trade, customs unions, common markets, economic unions, monetary economic and political unions.

Internationalization is the process of the development economic relations between national economies, when the economy of one country acts as a part of the global economic process, which deepens on the basis of the international division of labor, industrial and scientific-technical specialization and cooperation. It is possible to highlight the four most important general economic characteristics of integration. The first of them is the international regulation of the economic processes. The second one is the gradual formation of more or less independent complexes of some regional international economic complex with general ratios and the common structure of the reproduction. The third one is the expansion of spatial opportunities for the international movement of goods, labour force and financial resources within limits of the region and the removal of various administrative and economic barriers to such displacement. The final characteristics are the convergence of domestic economic conditions in member countries of integration associations and lining their level of economic development.

The following are the main types of integration associations: 1) free trade area, when participating countries are limited to cancellation of customs barriers in mutual trade; 2) customs union, when free movement of goods and services inside of the group complements the common customs tariff against third countries and a system of proportional sharing customs revenue; 3) a common market that eliminates barriers between countries not only in mutual trade, but also for the movement of labor and capital; thus, the it is the common market of goods, services, capital, and labour; 4) economic union, which involves a common market and the implementation of the unified economic policy, the establishment of a system of international regulation of social and economic processes in the region; 5) monetary union that provides the economic union based on a common banking system and a common currency; 6) political union.

Free Trade Agreements is the simplest form of economic integration, a more complicated form is a common market. The economic and monetary union is the most complicated form of international economic integration. Economic integration is something more than a simple unification of national economies. An optimally balanced domestic economy (in territorial, economic and social senses) that imply a production with minimum costs, maximum profit and the highest productivity of labour should arise in the economy of the countries that are being integrated into the process of deep structural reforms. We are talking about the qualitative effect of synergy – the integrated whole should represent a brand new, more advanced economic mechanism. Due to integration of resources, structural transformations will give the opportunity to expand production, to eliminate the unevenness of development, to improve social welfare in the integrated countries.

The following indicators might be used to evaluate the level of the economy integration into the world economy. 1. The coefficient of advantage allows identifying the trade links in which countries have a high degree of attraction to each other. If the coefficient value is zero, the trade links between the governments are absent; if it is equal to one, the trade links are at the world average level. The higher the coefficient value, the higher the trade integration between countries:

(1)

where Ti – a trading partners’ share in a trade with any country;

Tw – a partner-country’s share in international external trade.

2. The coefficient of mutual advantage is the average of the indicators of advantages the first partner over the second and vice versa. The importance of trade flows cannot be compared by using indicators calculated per country. It is possible to eliminate this disadvantage by determining the coefficient for two countries at once.

3. The coefficient of comparative advantages demonstrates how much higher the intensity of international trade links between the two countries in comparison with their relations with other countries. The more the coefficient value exceeds one, the more is the degree of advantage.

Calculated by the formula:

(2)

where – total bilateral trade’s quantity;

– total exports and imports of countries A and b, respectively;

Ew – total world export’s quantity.

The current Ukraine’s situation in the world economy is characterized by contradictory trends. On the one hand, she has significant natural and labour resources, large production potential, and takes a leading position in the export of many important goods (in fact, mainly the group of fuel and raw materials), has great scientific and technical potential, high population’s educational level.

On the other hand, the economic downturn of the 1990's caused a significant weakening of Ukraine's position in the global economy. While being a medium developed country by a number of parameters, she has an intermediate position in the global economy between developed and developing countries. The impact of global processes on the national economy occurs in the following areas:

1. International trade: goods, services, technology; intellectual property’s objects;

2. International flow of production’s factors: capital (in the form of foreign direct investment); labour (in the form of spontaneous migrations of unskilled and low-skilled workers and in the form of "brain drain");

3. International financial transactions: loans (private, government, international organizations); main securities (shares, bonds and other debt obligations); derivative financial instruments (futures, options, etc.); currency transactions.

Among the selected destinations, the quantity of international financial transactions increases the most intense, then follows the international capital flows (direct investments) and finally goes the international trade. At the same time, currency transaction and the quantity of international agreements with securities are rapidly increasing in the financial direction.

Like in other economic phenomena, the question about the quantitative parameters’ characteristics arises after the qualitative’ ones. In this case, we are talking about how to measure the globalization of economic activity, to determine its degree and the dynamics in time. Foremost it is necessary to highlight two issues. The first is the parameters that might be the base for analyzing the level of world economy’s globalization in general. The second issue is the degree of economy’s openness of an individual country or a group of countries, the level of its participation in global economic processes. The answer to this question is especially necessary for evaluating the status and opportunities of the national Ukraine economy’ integration into the globalization process.

Foreign direct investment is an investment that involves long-term investment by a foreign investor and obtaining long-term control of a firm in another country (FDI recipient). FDI implies that the investor gets an opportunity to influence significantly over the management of the company that receiving the investment. Attractive for foreign investors are those developing countries that are different from other more favourable conditions for investment (investment climate), which require, first and foremost, political stability, certain prospects for economic growth and the absence of currency restrictions.

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