ABSTRACT
The traditional approach to economic integration is based on the pure theory of customs unions. It is a "trade" approach in the sense of dealing with the liberalization of the current account and neglects other aspects of international economic relationships such as tax agreements, the harmonization of fiscal and monetary policies, liberalization of capital flows, the free movement of labor, and many other forms of international cooperation. The analytical framework supporting economic integration among developing countries is based on various departures from the original theoretical framework. In the late 1950s, many of the leading economic and political forces in Latin America arrived at the conclusion that the deterioration in their terms of trade, which was a central problem during the decade, was a very short-run phenomenon of the world economy. Latin American free trade area established a transition period of 12 years during which the member countries would gradually eliminate most of their mutual trade barriers following product-by-product negotiations.
