An economic integration (EI) is when two or more firms integrate parts of their economy together through free trade agreement such as NAFTA or through economic union such as EU. An EI has been proved to attract foreign investment from countries outside of the EI zone. However, the effect on foreign investment from countries within the EI zone is ambiguous. One theory claimed that a foreign investment from countries within an EI zone will be reduced and is substituted by an international trade. Another theory mentioned that a foreign investment will be increased due to a lower cost of factor relocation. In this paper, we develop a system dynamics model having two countries with one firm in each country. Each firm can decide whether to export products to another country or to invest in that country. The results show that an economic integration will support both international trade and investment if two countries are not significantly different. However, if two countries have different production cost, firms in countries with higher production cost will relocate their operation to the countries with lower production cost and export products to countries with high production cost instead.