Regional Integration

Regional integration is an arrangement between nation states to cooperate in some comprehensive way for their mutual benefit. The term usually applies to neighboring states, and it usually entails a series of agreements to benefit the well-being of the region—for example, by promoting free trade, enabling easier flow of financial transactions, implementing uniform environmental and other legal standards, and allowing easier travel within the region. The scope of integration can grow to issues like security, culture, environmental protection, and social issues, and may extend also into the political realm. The aim of the integration is explicitly to benefit the members of the region (or bloc), but it comes at the cost of national sovereignty.

According to Luk Van Langenhove and colleagues, regional integration initiatives have the potential to fulfill important functions that are beyond the sphere of trade integration, such as the creation of an appropriate enabling environment for private sector development; the development of infrastructure programs in support of economic growth and regional integration; the development of strong public sector institutions and good governance; the reduction of social exclusion and the development of an inclusive civil society; contribution to peace and security in the region; the building of environment programs at the regional level; and the strengthening of the region's interaction with other regions of the world.

There are several forms of regional integration, each with varying levels of commitment and influence. Oded Shenkar and Yadong Luo discuss four forms of economic integration (or trading blocs) as follows: First, a free trade area is the least restrictive and loosest form of tradingbloc among countries and aims to abolish all barriers to trade among member countries. The North American Free Trade Agreement (NAFTA) is an example of this form of integration. The next level is the customs union, whereby member nations dismantle barriers to trade in goods and services among themselves; it establishes a common trade policy with respect to nonmembers—for example, the Central American Common Market. A common market includes the features of the customs union with additional mobility of factors of production such as capital, labor, and technology as well as a common external trade policy by which members should cooperate closely in monetary, fiscal, and employment policies. Finally, the economic union is the ultimate form of regional economic integration that simply aims to eliminate all barriers that may impede trade and other economic interactions among member nations. As with the example of the European Union (which evolved from the European Common Market), members aim to harmonize monetary policies, taxation, and government spending, and a common currency would be used by all members. Beyond this level is the concept of “political union” that results in a single political entity like the United States.

Examples of prominent regional economic agreements are the Andean Community of Nations (CAN for Comunidad Andina de Naciones), Association of Southeast Asian Nations (ASEAN), Asia-Pacific Economic Cooperation (APEC), European Union (EU), Mercosur/Mercosul, and North American Free Trade Agreement (NAFTA). These agreements are never etched in stone and often change. However, the general historic trend is toward growth, strengthening, and affiliation to these blocs. For example, beginning from the Treaty of Rome in 1957, six European nations (France, Germany, Italy, Netherlands, Belgium, and Luxembourg) formed a customs union that grew in stages to become a common market and, in 1995, to the EU with 15 members. In 2007 EU membership was extended to Romania and Bulgaria so that total membership [Page 1350]is now 27 members, and ongoing negotiations for future membership are also under way with a number of other states including Turkey.

...