Download - The Political Economy of Regionalism
The Political Economy of Regionalism
April 20, 2006
Regional Anatomy I Ken JIMBO
Review 1)Defining “Regionalism”
Cognitive definition A complex of attitudes, loyalties and ideas which
concentrates the individual and collective minds of people(s) upon what they perceive as ‘their’ region.
Functional Definition: A functional relation that bundles multiple
nations with their political, economic and cultural inheritance, often based on the geographical advantage
Review 2)Why ‘Regionalism’ matters?
Deepening and widening process of globalization made ‘region’ in the different context How the current process of regionalism
is different from ones of decades ago? Were there any historical trends or
waves of ‘making of a region’?
Historical Background of Regionalism
Rise and Fall of Regionalism The First Wave: 1960’s The Second Wave: 1980-90’s The Third Wave (?): 2000’s
Jagdish BaghwatiJagdish Baghwati““Regionalism and Multilateralism: an Overview” Regionalism and Multilateralism: an Overview” (1993)(1993)
Stages of Regional Integration
Free Trade AreaFree Trade AreaEliminating mutual trade barriers but maintaining Eliminating mutual trade barriers but maintaining external tariffs external tariffs
Customs UnionCustoms UnionFree trade area plus common external tariffFree trade area plus common external tariff
Common MarketCommon MarketCustoms Union plus free movement of Capital (ie Customs Union plus free movement of Capital (ie Labour; Technical harmonization)Labour; Technical harmonization)
Economic UnionEconomic UnionCommon Market plus Coordination of policies and Common Market plus Coordination of policies and freedom of services, single currencyfreedom of services, single currency
Political UnionPolitical UnionEconomic Union plus Common PoliciesEconomic Union plus Common Policies
BELA-BALASSA, BELA-BALASSA, 19611961
Scheme
FreeIntra-
SchemeTrade
CommonCommercial
Policy
FreeFactor
Mobility
CommonMonetary& FiscalPolicy
OneGovernment
Free Trade Area
O X X X X
Customs Union
O O X X X
Common Markets
O O O X X
Economic Union
O O O O X
Political Union
O O O O O
Schematic Presentation of Regional Integration
Sources of Regionalism
Welfare of MembersWelfare of Members Preferential Trade Agreements (PTAs) can Preferential Trade Agreements (PTAs) can
enhance members’ welfare if these enhance members’ welfare if these arrangements create more trade among arrangements create more trade among members than they divert from efficient members than they divert from efficient producers outside PTAsproducers outside PTAs
0 %100 %
$100 Product
0% tariff : $100100% tariff: $200
Free Trade plusFree Trade plusCustomers UnionCustomers Union
Trade Creation / Diversion Effect
The two red triangles represent The two red triangles represent the positive welfare gains from the positive welfare gains from the trade creation effect the trade creation effect
(p: price / t: tariff)(p: price / t: tariff)
After joining the customs union, the After joining the customs union, the tariff inclusive price of imports from tariff inclusive price of imports from Australia rises, but the price of Australia rises, but the price of imports from France remains the imports from France remains the same.same.
(F: France / Aus: Australia)(F: France / Aus: Australia)
GATT/WTO Rules and PTA
GATT / WTO Rules An essential characteristic of WTO is
non-discrimination between members.
Under the “most favored nation” (MFN) clause, a WTO member must extend to all other WTO signatories the trade concessions made to any one member.
GATT/WTO Rules and PTA
Regional Trade Agreements There are some exceptions to the
MFN rule, which allow countries to apply lower tariffs to imports from particular countries.
GATT Article 24GATT Article 24……such union or agreement such union or agreement shall notshall not on the whole on the whole be higher or more restrictive than the general be higher or more restrictive than the general incidence of the duties and regulations of incidence of the duties and regulations of commerce applicable in the constituent territories commerce applicable in the constituent territories prior to the formation of such union (CU) and Free-prior to the formation of such union (CU) and Free-trade Areatrade Area......
GATT Rational of Regionalism
Characteristic of National Economy Cultivation of National Industry
Consistent with GATT Ultimate Goals Deeper integration would be achieved
simultaneously within those areas where politics permitted faster movement to free trade under a strategy of full and time-bound commitment
The First Wave of Regionalism
Background 1950s/60s: considerations of the
sustainability of the nation-state Post-Colonial nation building process
Regional Frameworks Western Africa Economic Community (1956) Central-Latin America Free Trade
Association (1960) Central America Common Market (1960) Caribbean Free Trade Union (1965)
Rise and Fall (Collapse) ofFirst Wave Regionalism
Member States Small and Medium-sized Economy Limited ‘Trade Creation’ Effect
Diluted Regional Dynamism “Trade Substitution” Protection of Regional Industrial Sector
Failure in Economic Development Limited-Scale of Industrial Transformation Limited-Scale of Technological Innovation
“The Obsolescence of Regional Integration Theory” Ernst Haas, 1975
The failure to replicate the European experience elsewhere
National governments continued to be powerful actors
outside the region – eg: in international relations inside the region – not transcending the national but
instead intergovernmental where national preferences and power remained more important that the region as an actor
Towards concepts of (complex) interdependence
The Rise of the Second Wave of Regionalism
Europe European Union (1993)
North America NAFTA (1989)
Asia-Pacific APEC (1989) ARF (1994)
Southeast Asia ASEAN Free Trade Area (1992)
Latin America Mercosur (1995)
Persian Gulf GCC (1981)
Background of the Second Wave Regionalism
Weakened GATT Regime Declining of US Economic Hegemony (cf. Robert Keohane, Aft
er Hegemony) Increasing Complexity of Interest Coordination: “Transaction
Costs” Increasing Sectors: Finance, Insurance, Tele-Communication
s, Services, IT…etc
Rise of “Developmentalism” Model From “Trade Substitution” to “Developmentalism” (cf. Yasusu
ke Murakami, Anti-Classical Theory of Political-Economy) “East Asian Miracle” (World Bank) and Rise of Asian Economy
Logic of Dynamic Growth Model
CUSTOMS UNION
TECHNICALHARMONISATION
COMMUNITY METHOD
1958 1968 1972 1979 1985 1992 2000
MARKETHARMONISATION
ECONOMIC ANDMONETARY UNION
INTERNAL MARKET
WHITE PAPER
INSTITUTIONALREFORM
DEFENCE?
ENLARGEMENT
SINGLE ACT
POLITICAL UNION
ECONOMIC ANDMONETARY UNION
Source: Esko Antola
Characters of Second Wave Regionalism
Mega-Regionalism Participation of Large-scale Economy (US, EU,
Japan, China) Nested-Box Model (Yamamoto, Kikuchi)
Global Institution (GATT/IMF) – Mega-Regionalism-Sub-Regionalism
Open Regionalism Harmonization with Global
Institutions/Frameworks Non-Discriminatory Trade Liberalization “Soft-Regime” Building
Stagnation of Second Wave Regionalism?
Stagnation of WTO Process (Global) Doha Round Process
Seattle Meeting (1999) Cancun Meeting (2003) Hong Kong Meeting (2005)
Stagnation of APEC Process (Regional) Bogor Declaration (1995) and Follow-on Process
Rise of Bilateral FTAs (Bilateral)
Rise of Bilateralism?
Flawed Effectiveness of ‘Open Regionalism’ Inclusiveness vs. non-criteria Consensus vs. ineffectiveness
Rise of Bilateral Rational Choice of Government Bilateral FTAs Ad-hoc Cooperation Functional Cooperation
Rise of the Third Wave of Regionalism?
Level of Cooperation/Integration
Timelines
Second Wave RegionalismSecond Wave Regionalism
Third Wave Regionalism ?Third Wave Regionalism ?
Globalism / Regionalism / Bilateralismand the ‘Recursion’ of the Region
Economic Sphere Security SphereEconomic Sphere Security Sphere
Global FrameworkGlobal Framework GATT / IMF UN / MultinationalGATT / IMF UN / Multinational
Mega-RegionalismMega-Regionalism APEC ARF / OSCE APEC ARF / OSCE
Regionalism Regionalism EU / ASEAN +3 EU / ASEAN EU / ASEAN +3 EU / ASEAN
Coalition Coalition Multilateral FTAs Anti-Terrorism Multilateral FTAs Anti-Terrorism
Bilateralism Bilateralism Bilateral FTAs Bilateral Alliance Bilateral FTAs Bilateral Alliance