Removing obstacles for greater market integration in Asia and the Pacific

Integration is the process of reducing fragmentation in markets for goods, services, capital, labour, knowledge and information in order to lower the costs of business transactions and trade. It facilitates the cross-border mobility of factors of production, such as capital and labour, and freer movements of goods and services. These elements promote efficiency in investment flows, trade and industry, leaving less room for information asymmetries, while promoting innovation and dissemination of technologies. Under market-led mechanisms for price determination, market integration leads to price convergence for goods, services and factors of production. Free markets catalyse competition but often result in only limited price and economic convergence. This is because convergence is also, and often to a larger degree, influenced by structural (and geographical) differences, such as transport obstacles, energy deficits or other barriers that increase transaction costs. Broadly, market-led integration should be guided and enhanced by the harmonization, coordination or mutual recognition of policies, rules and regulations.

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