A rchive Date
[ 15-02-2004 ]
Category
[ International Relations ]
sub-Categoy
[ Globalisation ]
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[http://www.globalprogress.org/ingles/Dakar/Kasse.html
Globalisation and intensified regionalisation: meaning and prospects
Moustapha Kasse
INTRODUCTION
The intention of this piece is to offer some food for thought on the subject of regionalism in relation to globalisation with a practical illustration involving the West African Economic and Monetary Union (WAEMU), founded in 1994.
Globalisation - if treated as meaning something like mondialisation* - has gone hand in hand with a dual phenomenon: on the one hand, the slowdown and indeed recession since the 1980s in virtually all the member countries of the OECD and, on the other, the enlargement and strengthening of regionalism.
Once confined to Europe (1953), and then mainly to the newly independent developing countries facing structural handicaps (weak and dislocated markets, scant human and financial resources, excessive extraversion, etc.), the regionalisation process is now spreading across the entire planet.
The leading bastion of economic liberalism, North America, converted to regionalism with the introduction of NAFTA with its 360 million consumers and its GNP in excess of $6,000 billion. The European Economic Area brings together 380 million consumers. ASEAN is a free-trade area of 320 million consumers with a GNP of more than $310 billion. Latin America is in there too with MERCOSUR, among others.
The world seems to be organising itself into a multipolar sphere by creating regional blocs, with a hegemonic triad formed by a re-designed North America, a Europe extending its unification to the monetary sphere, and a Japan redeploying in its near Asian periphery. Regionalism can look forward to a new vitality covering every continent of the world. Its scale and its dynamism are transforming the shape of mondialisation/globalisation. The only area untouched by the process is a 'potential great economic sphere' of the world's Chinese communities. These regional blocs linking entire segments of production systems and concentrating flows of trade, are becoming highly competitive places with marked inequalities (which can test their members' capacity for solidarity) and form a kind of archipelago economy.
In this period of globalisation of the worlds' economic and financial system, this heavy regionalising trend inevitably raises a number of queries at least three of which are fairly typical:
- First, what are the underlying reasons for the extension of regionalisation?
- Next, what consequences does it have?
- Finally, how does it link into globalisation and, in particular, into multilateral negotiations?
This broadly corresponds to the three basic questions concerning all integration: Why? For whom? How? In other words, what are the advantages of integration? What are the interests at stake for the various players involved? Which integration systems are the most relevant, and indeed the most effective?
* Translator's note: the author makes a distinction here between mondialisation and globalisation. Both these terms are rendered in English as 'globalisation'.
I. - UNDERLYING REASONS FOR RENEWED INTEREST IN REGIONALISATION
On examination, the reasons for regionalisation in the 80s and 90s are found to be very different from those of the 60s, owing to the greatly changed global context. In these times of ineluctable globalisation, it is no longer the goal of any country or group of countries to seek a collective autonomy on the basis of an import-substitution model and an autarkic or self-centred development. Today, such illusions are swept away by the new perspectives opened by intensification of trade, with each country seeking to derive profit from export-led growth.
Nowadays, three sets of reasons found in the various integration treaties are used in justification of regionalism.
- the first set of reasons that bear on the 'small countries', reside in the fact that integration for these small countries is a means of being present on the global market. These countries, whatever their size and the value of their resources, often lack sufficient weight for a significant presence on the global market. Regionalism offers them advantages such as creation of trade flows, economies of scale, reduced costs, etc. Consequently, regionalism is seen as a stepping stone to the global market;
- the second set of reasons tie in with the fact that, without integration, countries cannot profit from the markets close at hand of their larger neighbours;
- the third set of reasons tie in with the fact that integration offers a better environment for exploiting comparative advantages. This holds true for the large as well as the small countries.
II. - ISSUES CONCERNING THE OPTIMUM INTEGRATION AREA
1. The effects of trade creation and trade deflection
Since Mundell, economists have attempted to develop a method for determining the costs and benefits of participation in an efficient union. What, in fact, is the net gain that countries can expect from their membership in a regional bloc? This brings us to two types of effects operating in opposite ways:
- in terms of production costs, there is a trade creation effect if the integration involves moving to less expensive sources of supply,
- there is a trade deflection effect if the integration enables a partner A to purchase from a partner B goods that can be obtained at less cost in C.
The gains from integration will be that much greater because:
- the initial tariff between partners will be high,
- cost differentials between partner countries and third countries will be less,
- price elasticities of domestic supply and demand will be strong.
Consequently, the groupings will produce more trade deflection effects than trade creation effects because of the initial conditions. The fact that the developing countries (see text on WAEMU) cannot be optimum trading or monetary areas according to orthodox thinking does not mean that there are no gains to be had from integration. There are always some benefits attached to integration:
- these may come from savings in transaction costs, from savings due to greater efficiency through increased competition, and from administrative savings; in other words, non-integration makes for fragmentation of markets, increased costs and inefficiencies;
- economies of scale and the expected profits encourage the development of a basic infrastructure: international highways, rail and air links, telecommunications, etc.;
- they may also come from the wave of convergence in Europe which could accentuate relocation and from which the integrated developing countries stand to gain the most.
However, it is not by putting together narrow and badly structured markets, often subject to numerous barriers, that integration will be achieved and advantage be taken of these benefits. There is a whole dynamic to be put into motion in an appropriate integration system.
2) The advantages of localised trading relations
Countries have a tendency to organise trading relations with their immediate neighbours. The ratio of a country's trade to its share in global production brings home the advantages attached to localised trading.
3) Economies of scale
Extension of markets brings a whole series of positive effects, particularly for productive capacity. These countries can benefit from increasing the size of markets.
III. - LINKING REGIONALISM WITH MULTILATERALISM: OSMOSIS OR DISRUPTION OF GLOBALISATION
Is regionalisation compatible with globalisation, and particularly the new multilateralism (WTO)? In other words, won't regionalism be either a necessary stage on the way to multilateralism (a multipolar world comprising highly competitive regional blocs), or an alternative to multilateralism (regional blocs substituting for the unacceptable rules of multilateral organisations and becoming places of retreat). The form currently taken by regional blocs shows that they are places for concentrating the sum total of financial, industrial, scientific, technological, cultural and political functions. Two thoughts here about the new forms of protection and review of the most favoured nation clause.
1. The new forms of protection
Won't the successive cuts in customs duties reduce the interest in regional groupings established on the basis of free trade in goods and services? On the other hand, won't harmonised legislation on investments and financial operations, free movement of capital and persons, right of establishment, coordination of research effects provide greater margin for manoeuvre to companies located in the member countries of these groups? In other words, multinationals locate or relocate on the basis of advantages conceded by the regional blocs.
2. The 'least discriminated-against nation clause'
Inside NAFTA, the United States is reinforcing its internal protection system, prompting its neighbours and partners to look for arrangements to avoid discrimination. On the other side, the United States is concerned that EU enlargement will shut out part of their agricultural exports from some of their traditional markets. They will therefore seek compensation in the form of reduced community protection.
IN CONCLUSION
The return of regionalism and its intensification raises a whole host of questions to which our Commission, as a collective intelligence, should give serious thought.
The first series of questions concern economic issues:
1. isn't the new regionalism a recomposition of the global system into homogeneous and highly competitive blocs? What sort of a world will it be where trade is carried on principally in a tripolar realm (triad) and where financial integration is developed in a globalised perspective in the wake of decompartmentalisation, financial disintermediation and deregulation? What would happen to the African continent and the other casualties of globalisation?
2. what place does foreign direct investment have in a regionalised system? Is it acceptable that the strategic oligopolies should themselves enter the regional dimension?
3. how does regionalisation impact on current WTO rules? Will trade policy rules produce more cooperation, or will they generate more conflict? In other words, are the rich countries of the triad (the United States, Europe and Japan) capable of setting coherent trading balances among themselves. Unless this can be done, clearly global economic growth will fall short of its potential.
The second series of questions are political, social and cultural. It is here that thinking and research are weakest.
1. What political model is to be adopted given the new regional situation, and what should be the attitudes of political parties sharing the same convictions? What is the social democratic response to internationalisation of capital? Western right-wing parties are now unified by a conformist economic liberalism offering the world just one project: economic liberalism. Is there any alternative on the political (organisational) and cultural levels?
2. What social policy might accompany regionalisation/globalisation? Will social protection covering working conditions, safety at work, health and material welfare of workers be blocked at national level, or will it find its way into regionalisation? What form of regional management for capital-labour relations? Shouldn't the regional blocs adopt 'a corpus of social rights' (Jacques Delors) which could be negotiated by the social partners and then translated into Community legislation? At a time when workers' demands are taking on a Community character, moves should be made to draw up some kind of Community social charter which allowed the dialogue needed for social cohesion.
3. How will cultural identity be treated? Regionalism is effected between countries with very different cultural traditions. What is to become of the exceptions or the cultural identities? How do you manage these particularities at a time when globalisation is imposing a single language for finance, science and communication? Naturally, this language of unification carries and propagates the values associated with it, the lifestyle and social model of its country of origin.
 World Fact Book (CIA)]
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