Comparative Regional Integration: Europe and Beyond

Comparative Regional Integration

Author(s): Finn Laursen (ed)

ISBN: 978-1-4094-0181-0

Publisher: Ashgate Publishing Company

Year: 2010

Price: ₤65.00

Reviewed by Martyn de Bruyn, Ph.D., Assistant Professor at the Department of Political Science of Northeastern Illinois University

Comparative Regional Integration is a good comparative study of regional integration in North America, Latin America, Southeast Asia, Africa, and the Caribbean. This book presents a series of comparative case studies which mainly discuss NAFTA, MERCOSUR, and ASEAN as different models for regional integration. The overall theoretical framework, as discussed by Finn Laursen in the first chapter, focuses on two collective action problems: power asymmetry and credible commitments. It is theorized that the existence of a single dominant large economy in a region will limit the chances of successful economic integration. It is further theorized that the drawing up of a near complete contract will limit the ability of a regional economic agreement to develop into new areas of regionalism. While this logic is applied to most chapters, the importance of leadership as an alternative to commitment institutions is a thread that is implicitly woven into most chapters.

The first section of the book compares regional integration in the North American Free Trade Agreement (NAFTA) with the European Union (EU). The two regional trade blocs differ on both theoretical dimensions: (1) NAFTA has a near complete contract while the EU is based on an incomplete contract; (2) NAFTA has a single dominant economy (the US) and the EU has multiple large economies. In terms of regional economic integration one would thus expect weak regional integration in NAFTA and stronger regional integration in the EU. Since NAFTA is based on a near complete contract, that clearly defines the limits of regional integration, the agreement is institutionally rigid and unlikely to adapt to new developments. NAFTA, according to Alex Warleigh-Lack, is US driven regionalization in which Mexico and Canada adopt US style policies. Unlike the EU, there is no commitment to the common good in NAFTA, that is to say, there is no solidarity program. The EU has a comprehensive strategy for the development of the lesser developed regions in the Union through its European Regional Development Fund, the Cohesion Fund, and the Solidarity Fund. As both John Sutcliffe and Isidro Morales point out, NAFTA includes no institutional structure that aims at the convergence of the standards of living. The purpose of NAFTA is increased trade between the three member states, but, unlike the EU, NAFTA does not coordinate trade between its member states and third parties. This, as Morales points out, undermines the effectiveness of the privileges of NAFTA as it has been superseded by unilateral trade agreements between the US and China, and Brazil. Without buying into the institutions of NAFTA, China, and Brazil stand to gain the same access to the US market as NAFTA members, making membership less beneficial. It is unlikely that NAFTA will develop along EU lines into a North American Community because national political preferences in Washington DC, Ottawa, and Mexico-City differ widely on issues such as immigration and security. The lack of a common destiny or future goal also limits the potential of NAFTA to develop into a more encompassing community. The lack of a solidarity program in NAFTA is, according to Robert Finbow, related to a contrasting style in dealing with the consequences of globalization. The EU’s consensus oriented approach to labor relations focuses on soft law and encourages the application of international standards. In contrast, in the US adversarial system labor groups oppose economic integration for fear that workers will bear the cost of free trade. In Europe labor groups favor economic integration in return for a seat at the table and real influence on government decision making. The focus on soft law and framework agreements cannot be replicated under NAFTA, according to Finbow, due to the lack of a higher authority, the equivalent of the European Commission, to provide the necessary incentives or enforcement.

The second section of the book compares economic integration in Mercado Común del Sur (MERCOSUR) and the EU. Edward Moxon-Browne makes the important observation that MERCOSUR has adopted EU style institutions but has not achieved anywhere near a similar level of economic integration. The reason for economic integration within Europe and Latin America are similar, both being a response to global economic pressure and an effort to consolidate democratic development among member states. The reasons for the lack of economic integration in MERCOSUR are: greater power asymmetry than in the EU, no clear paymaster as Brazil has the largest economy but Argentina a higher GDP per capita, and economic interdependence of Latin American states that is much weaker than in the EU. Unlike NAFTA where the US is the regional driver of economic integration, Brazil has not taken the lead in MERCOSUR. And as was the case with NAFTA, unilateral trade deals (with the US and China) are undermining the significance that MERCOSUR can have on regional economic integration. The EU has a strong relationship with MERCOSUR as it is the Latin American trading bloc’s leading donor, prime investor, and second trading partner. There have been periodic summits between EU and MERCOSUR officials that discuss trade and political dialogue at the bi-regional level. Both Moxon-Browne and Joaquin Roy conclude however, that the EU model, all the EU support notwithstanding, has not been successfully transferred to Latin America. Both point out that besides the dominant role of Brazil, Latin American countries have signed many bilateral FTA’s with the US and European countries that weaken the prospects of more integration within MERCOSUR. Roy also points at the tradition of presidentialism and the recent focus on securitization as factors that made it harder for Latin American countries to surrender sovereignty.

The third section of the book focuses on the EU and ASEAN. ASEAN, unlike the EU, NAFTA, and MERCOSUR, was founded with the purpose of keeping the peace in Southeast Asia. Economic cooperation was only introduced in ASEAN at the end of the cold war in the early 1990s. The ASEAN Charter of 2007 transformed the institution towards the development of an Asian Economic Community. As the principles of sovereignty and non-interference have remained center stage in the Charter, the pooling of sovereignty EU-style is not expected in Southeast Asia in the near future. The Asian Economic Community has not even developed to the point of a customs union. Lay Hwee Yeo states that, despite many blue prints for the Asian Economic Community, there is no agreement on a treaty, a budget for the organization, or the transfer of some decision making power to a semi-autonomous entity. The member states of ASEAN, according to Yeo, are moved by the forces of globalization, and increased competition from China and India, but they are unwilling to surrender some sovereignty to a supranational institution due to a lack of economic solidarity, common identity, and social cohesion.
In the final section of the book Laursen provides an excellent analytical summary of how NAFTA, MERCOSUR, and ASEAN compare with the EU. As stated in the introductory chapter, the contract, power asymmetry between members, and the degree of intra-regional trade all affect the success of economic integration in a region. The EU is successful because of its high level of intra-regional trade, the relative incomplete contract, and a low level of power asymmetry. NAFTA is relatively successful despite the existence of a complete contract, and a high level of power asymmetry between its members. While the powers of its Free Trade Commission are limited compared with those of the European Commission, NAFTA does have an effective dispute settlement mechanism and a reasonably high level of intra-regional trade. MERCOSUR’s integration potential is much weaker than NAFTA’s despite the fact that it most closely imitated and cooperated with the EU. Intra-regional trade is very low in comparison with the EU and NAFTA, and the power asymmetry (Brazil accounts for 75% of total GDP) makes it difficult to overcome collective action problems. Brazil opposes the idea of providing MERCOSUR’s institutions with a level of autonomy that the European Commission or the European Court of Justice possess. Brazil also opposes regional economic solidarity measures. ASEAN is also characterized by relatively low intra-regional trade. Consultation, consensus, and the principle of non-interference are still the norm at ASEAN. While the removal of tariffs and NTB’s has become a priority since the end of the Cold War, the Asian Economic Community has not developed to even a simple customs union.

One variable that seems to affect the integration success of all regional organizations is political leadership. The leadership of France and Germany was instrumental in the founding of the EU, and US leadership in NAFTA created a fairly successful regional trade organization despite the apparent lack of EU-style institutions and commitments. The lack of leadership, on the other hand, in MERCOSUR and ASEAN makes it very difficult for these regional organizations to develop their integration potential as further integration is constantly challenged by diverging national interests. It will be interesting to see whether and when the balance between leadership and institutions will shift in favor of the latter.