Regional integration
Encyclopedia
Political economy
Political economy originally was the term for studying production, buying, and selling, and their relations with law, custom, and government, as well as with the distribution of national income and wealth, including through the budget process. Political economy originated in moral philosophy...
initiative where commercial purposes are the means to achieve broader socio-political and security objectives. It could be organized either on a supranational or an intergovernmental
Intergovernmentalism
-A theory of regional integration:The theory is not applied on European integration which rejects the idea of neofunctionalism. The theory, initially proposed by Stanley Hoffmann suggests that national governments control the level and speed of European integration. Any increase in power at...
decision-making institutional order, or a combination of both.
Past efforts at regional integration have often focused on removing barriers to free trade
Free trade
Under a free trade policy, prices emerge from supply and demand, and are the sole determinant of resource allocation. 'Free' trade differs from other forms of trade policy where the allocation of goods and services among trading countries are determined by price strategies that may differ from...
in the region, increasing the free movement of people, labour, good
Good
Good may refer to:* Good and evil - The distinction between positive and negative entities* Good - Objects produced for market* Form of the Good - Plato's macrocosmic view of goodness in living* Good...
s, and capital
Capital (economics)
In economics, capital, capital goods, or real capital refers to already-produced durable goods used in production of goods or services. The capital goods are not significantly consumed, though they may depreciate in the production process...
across national borders, reducing the possibility of regional armed conflict (for example, through Confidence and Security-Building Measures
Confidence and Security-Building Measures
Confidence building measures or confidence and security building measures are actions taken to reduce fear of attack by both parties in a situation of tension with or without physical conflict...
), and adopting cohesive regional stances on policy issues, such as the environment, climate change and migration.
Overview
Regional integration has been defined as an association of statesSovereign state
A sovereign state, or simply, state, is a state with a defined territory on which it exercises internal and external sovereignty, a permanent population, a government, and the capacity to enter into relations with other sovereign states. It is also normally understood to be a state which is neither...
based upon location in a given geographical area, for the safeguarding or promotion of the participants, an association
Voluntary association
A voluntary association or union is a group of individuals who enter into an agreement as volunteers to form a body to accomplish a purpose.Strictly speaking, in many jurisdictions no formalities are necessary to start an association...
whose terms are fixed by a treaty
Treaty
A treaty is an express agreement under international law entered into by actors in international law, namely sovereign states and international organizations. A treaty may also be known as an agreement, protocol, covenant, convention or exchange of letters, among other terms...
or other arrangements. Philippe De Lombaerde and Luk Van Langenhove define regional integration as a worldwide phenomenon of territorial systems that increase the interactions between their components and create new forms of organisation, co-existing with traditional forms of state-led organisation at the national level. According to Hans van Ginkel, regional integration refers to the process by which states within a particular region increase their level of interaction with regard to economic, security, political, and also social and cultural issues.
In short, regional integration is the joining of individual states within a region into a larger whole. The degree of integration depends upon the willingness and commitment of independent sovereign states to share their sovereignty
Sovereignty
Sovereignty is the quality of having supreme, independent authority over a geographic area, such as a territory. It can be found in a power to rule and make law that rests on a political fact for which no purely legal explanation can be provided...
. Deep integration that focuses on regulating the business environment in a more general sense is faced with many difficulties.
Regional integration initiatives, according to Van Langenhove, should fulfil at least eight important functions:
- the strengthening of tradeTradeTrade is the transfer of ownership of goods and services from one person or entity to another. Trade is sometimes loosely called commerce or financial transaction or barter. A network that allows trade is called a market. The original form of trade was barter, the direct exchange of goods and...
integration in the region - the creation of an appropriate enabling environment for private sectorPrivate sectorIn economics, the private sector is that part of the economy, sometimes referred to as the citizen sector, which is run by private individuals or groups, usually as a means of enterprise for profit, and is not controlled by the state...
development - the development of infrastructureInfrastructureInfrastructure is basic physical and organizational structures needed for the operation of a society or enterprise, or the services and facilities necessary for an economy to function...
programmes in support of economic growthEconomic growthIn economics, economic growth is defined as the increasing capacity of the economy to satisfy the wants of goods and services of the members of society. Economic growth is enabled by increases in productivity, which lowers the inputs for a given amount of output. Lowered costs increase demand...
and regional integration - the development of strong public sectorPublic sectorThe public sector, sometimes referred to as the state sector, is a part of the state that deals with either the production, delivery and allocation of goods and services by and for the government or its citizens, whether national, regional or local/municipal.Examples of public sector activity range...
institutions and good governanceGood governanceGood governance is an indeterminate term used in development literature to describe how public institutions conduct public affairs and manage public resources in order to guarantee the realization of human rights. Governance describes "the process of decision-making and the process by which...
; - the reduction of social exclusionSocial exclusionSocial exclusion is a concept used in many parts of the world to characterise contemporary forms of social disadvantage. Dr. Lynn Todman, director of the Institute on Social Exclusion at the Adler School of Professional Psychology, suggests that social exclusion refers to processes in which...
and the development of an inclusive civil societyCivil societyCivil society is composed of the totality of many voluntary social relationships, civic and social organizations, and institutions that form the basis of a functioning society, as distinct from the force-backed structures of a state , the commercial institutions of the market, and private criminal... - contribution to peace and security in the region
- the building of environmentNatural environmentThe natural environment encompasses all living and non-living things occurring naturally on Earth or some region thereof. It is an environment that encompasses the interaction of all living species....
programmes at the regional level - the strengthening of the region’s interaction with other regions of the world.
The crisis of the post-war order led to the emergence of a new global political structure. This new global political structure made obsolete the classical Westphalian
Westphalian sovereignty
Westphalian sovereignty is the concept of nation-state sovereignty based on two things: territoriality and the absence of a role for external agents in domestic structures....
concept of a system of sovereign states to conceptualise world politics. The concept of sovereignty becomes looser and the old legal definitions of an ultimate and fully autonomous power of a nation-state
Nation-state
The nation state is a state that self-identifies as deriving its political legitimacy from serving as a sovereign entity for a nation as a sovereign territorial unit. The state is a political and geopolitical entity; the nation is a cultural and/or ethnic entity...
are no longer meaningful. Sovereignty, which gained meaning as an affirmation of cultural identity, has lost meaning as power over the economy. All regional integration projects during the Cold War
Cold War
The Cold War was the continuing state from roughly 1946 to 1991 of political conflict, military tension, proxy wars, and economic competition between the Communist World—primarily the Soviet Union and its satellite states and allies—and the powers of the Western world, primarily the United States...
were built on the Westphalian state system and were to serve economic growth
Economic growth
In economics, economic growth is defined as the increasing capacity of the economy to satisfy the wants of goods and services of the members of society. Economic growth is enabled by increases in productivity, which lowers the inputs for a given amount of output. Lowered costs increase demand...
as well as security motives in their assistance to state building goals. Regional integration and globalisation are the two phenomena challenging the existing global order based upon sovereign states at the beginning of the twenty-first century. The two processes deeply affect the stability of the Westphalian state system, thus contributing to both disorder and a new global order.
Closer integration of neighbouring economies is seen as a first step in creating a larger regional market
Market
A market is one of many varieties of systems, institutions, procedures, social relations and infrastructures whereby parties engage in exchange. While parties may exchange goods and services by barter, most markets rely on sellers offering their goods or services in exchange for money from buyers...
for trade
Trade
Trade is the transfer of ownership of goods and services from one person or entity to another. Trade is sometimes loosely called commerce or financial transaction or barter. A network that allows trade is called a market. The original form of trade was barter, the direct exchange of goods and...
and investment
Investment
Investment has different meanings in finance and economics. Finance investment is putting money into something with the expectation of gain, that upon thorough analysis, has a high degree of security for the principal amount, as well as security of return, within an expected period of time...
. This works as a spur to greater efficiency, productivity
Productivity
Productivity is a measure of the efficiency of production. Productivity is a ratio of what is produced to what is required to produce it. Usually this ratio is in the form of an average, expressing the total output divided by the total input...
gain and competitiveness
Competitiveness
Competitiveness is a comparative concept of the ability and performance of a firm, sub-sector or country to sell and supply goods and/or services in a given market...
, not just by lowering border barriers, but by reducing other costs and risks of trade and investment. Bilateral and sub-regional trading arrangements are advocated as development tools as they encourage a shift towards greater market openness. Such agreements can also reduce the risk of reversion towards protectionism
Protectionism
Protectionism is the economic policy of restraining trade between states through methods such as tariffs on imported goods, restrictive quotas, and a variety of other government regulations designed to allow "fair competition" between imports and goods and services produced domestically.This...
, locking in reforms already made and encouraging further structural adjustment
Structural adjustment
Structural adjustments are the policies implemented by the International Monetary Fund and the World Bank in developing countries. These policy changes are conditions for getting new loans from the International Monetary Fund or World Bank, or for obtaining lower interest rates on existing loans...
.
In broad terms, the desire for closer integration is usually related to a larger desire for opening to the outside world. Regional economic cooperation is being pursued as a means of promoting development through greater efficiency, rather than as a means of disadvantaging others. Most of the members of these arrangements are genuinely hoping that they will succeed as building blocks for progress with a growing range of partners and towards a generally freer and open global environment for trade and investment. Integration is not an end in itself, but a process to support economic growth strategies, greater social equality
Social equality
Social equality is a social state of affairs in which all people within a specific society or isolated group have the same status in a certain respect. At the very least, social equality includes equal rights under the law, such as security, voting rights, freedom of speech and assembly, and the...
and democratisation.
Regional integration arrangements are a part and parcel of the present global economic order and this trend is now an acknowledged future of the international scene. It has achieved a new meaning and new significance. Regional integration arrangements are mainly the outcome of necessity felt by nation-states to integrate their economies in order to achieve rapid economic development, decrease conflict, and build mutual trusts between the integrated units. The nation-state system, which has been the predominant pattern of international relations since the Peace of Westphalia in 1648 is evolving towards a system in which regional groupings of states is becoming more important than sovereign states. There is a powerful perception that the idea of the state and its sovereignty has been made irrelevant by processes that are taking place at both the global and local level. Walter Lippmann believes that, "the true constituent members of the international order of the future are communities of states." E.H. Carr shares Lippmann view about the rise of regionalism and regional arrangements and commented that, "the concept of sovereignty is likely to become in the future even more blurred and indistinct than it is at present."
Regional Integration Agreement
Regional integration agreements (RIAs)has led to major development in the international relations among many countries which has also led to the mutual understanding among many countries. There has been also increase in the overall trade in the international level due to these agreements. In the context of the Global scenario, there has been a spurt in the context of regional trading blocs. This would contribute to one of the major advances in International relationsInternational relations
International relations is the study of relationships between countries, including the roles of states, inter-governmental organizations , international nongovernmental organizations , non-governmental organizations and multinational corporations...
in recent years. In such context, the whole aspect of a Regional Integration Agreement has gained high importance. Not only are almost all the industrial nations part of such agreements, but it is seen that a huge number of developing nations, to are a part of at least one, in cases, more than one such agreement.
The amount of trade that takes place within the scope of such agreements is about 35%, which accounts to more than one-third of the trade in the world. The main objective these agreement is to reduce the barriers related to the trade among various nations but the structure may vary from one agreement to another. The removal of the trade barriers among various nations by these agreement has led to liberalized economy in many countries which had brought significant economic development among these countries. A number of agreements notified to GATT and WTO is signed in each year has dramatically increased from 1990s. There were 194 agreement notified in 1999 and it contained 94 agreements form the early 1990s .
The last few years have experienced a huge qualitative as well as quantitative changes in the agreement related to the Regional Integration Scheme. The top three major changes were:
- Deep Integration Recognition
- Closed regionalism to open model
- Advent of trade blocs
Deep Integration Recognition
Deep Integration Recognition analyses the aspect that effective integration is a much broader aspect, surpassing the idea that reducing tariffs, quotas and barriers will provide effective solutions. Rather, it recognizes the concept that additional barriers tend to segment the markets. This in turn impedes the free flow of goods and services, along with ideas and investments. Hence, it is now recognized that the current framework of traditional trade policies are not adequate enough to tackle these barriers. Such deep-integration was first implemented in the Single Market Program in the European Union. However in the light of the modern context, this debate is being propounded into the clauses of different regional integration agreements arising out of increase in international trade. (EU).Closed regionalism to Open Model
The change from a system of Closed regionalism to a more Open Model had arisen out of the fact that the section of trading blocs that were created among the developing countries during the 1960's and 1970's were based on certain specific models such as those of import substitution as well as regional agreements coupled with the prevalence generally high external trade barriers. The positive aspects of such shifting is that there has been some restructuring of certain old agreements. These agreements tend to be more forward in their outward approach as well as show commitment in trying to advance international trade and commerce instead to trying to put a cap on it by way of strict control.Advent of Trade Blocs
The Advent of Trade BlocsTrade bloc
A trade bloc is a type of intergovernmental agreement, often part of a regional intergovernmental organization, where regional barriers to trade, are reduced or eliminated among the participating states.-Description:...
tend to draw in some parity between high-income industrial countries and developing countries with a much lower income base in that they tend to serve as equal partners under such a system. The concept of equal partners grew out of the concept of providing reinforcement to the economies to all the member countries. Under these section the various countries agree upon the fact that they will help economies to maintain the balance of trade between and prohibit the entry of other countries in their trade process.
An important example of this would be the North American Free Trade Area (NAFTA), formed in 1994 when the Canada
Canada
Canada is a North American country consisting of ten provinces and three territories. Located in the northern part of the continent, it extends from the Atlantic Ocean in the east to the Pacific Ocean in the west, and northward into the Arctic Ocean...
- U. S. Free Trade Agreement was extended to Mexico
Mexico
The United Mexican States , commonly known as Mexico , is a federal constitutional republic in North America. It is bordered on the north by the United States; on the south and west by the Pacific Ocean; on the southeast by Guatemala, Belize, and the Caribbean Sea; and on the east by the Gulf of...
. Another vibrant example would entail as to how EU has formed linkages incorporating the transition economies of Eastern Europe
Eastern Europe
Eastern Europe is the eastern part of Europe. The term has widely disparate geopolitical, geographical, cultural and socioeconomic readings, which makes it highly context-dependent and even volatile, and there are "almost as many definitions of Eastern Europe as there are scholars of the region"...
through the Europe Agreements. It has signed agreements with the majority of Mediterranean countries by highly developing the EU-Turkey
Turkey
Turkey , known officially as the Republic of Turkey , is a Eurasian country located in Western Asia and in East Thrace in Southeastern Europe...
customs union and a Mediterranean policy.
Recent Regional Integration
The regional integration in Europe took place in the Treaty on the European Union (the Maastricht Treaty) in November 1993. There was also a formation of the European Community. There was also formation of the European Free Trade Association (EFTA). There was also the formation of North American Free Trade Agreement (NAFTA) which is a free trade arrangement of North America formed in January 1994 . subsequently there was formation of the Latin America initiated the Southern Common Market Treaty (MERCOSUR) in January 1995. In The Pacific there was the ASEAN Free Trade Area (AFTA) in 1993 which looked into reducing the tarrifs. The AFTA started in full swing in 2000.External links
- United Nations University Institute on Comparative Regional Integration Studies (UNU-CRIS)UNU-CRISThe United Nations University Institute on Comparative Regional Integration Studies is a of the United Nations University . Based in Bruges, since 2001, UNU-CRIS specialises in the comparative study of regional integration, monitoring and assessing regional integration worldwide and in the study...
- Towards Unity
- Asia Regional Integration Center