Copyright Atomic Dog Publishing, 2008Copyright Atomic Dog Publishing, 2 Regional Economic and Political Integration Dana-Nicoleta Lascu Chapter 4

Copyright Atomic Dog Publishing, 2008Copyright Atomic Dog Publishing, Chapter Objectives Provide an overview of the determinants of regional economic and political integration. Examine the different levels of economic and political integration and identify, within each world region, economic and political agreements that have met with success. Examine the functions of the different policy and governance bodies of the European Union.

Copyright Atomic Dog Publishing, 2008Copyright Atomic Dog Publishing, Determinants of Economic and Political Integration Among the determinants of economic and political integration are:  A common culture.  A shared history.  Regional proximity.  A similar level of economic development.

Copyright Atomic Dog Publishing, 2008Copyright Atomic Dog Publishing, Impediments to Economic and Political Integration Among the impediments to economic and political integration are:  Differences in culture and history.  Physical distance.  Differences in level of economic development.  National concerns regarding loss of sovereignty.  A history of conflict.

Copyright Atomic Dog Publishing, 2008Copyright Atomic Dog Publishing, General Bilateral/Multilateral Agreement Free Trade Agreement Common Market Monetary Union Monetary Union Political Union Political Union Levels of Regional Economic and Political Integration

Copyright Atomic Dog Publishing, 2008Copyright Atomic Dog Publishing, General Agreements: Bilateral and Multilateral Forums and Agreements Bilateral and multilateral agreements can be industry-specific or involve some or all products exchanged between countries. They are less formal in nature than free trade agreements, and they are not as stable as the other forms of integration. Bilateral Agreements  Limited to two countries

Copyright Atomic Dog Publishing, 2008Copyright Atomic Dog Publishing, General Agreements: Bilateral and Multilateral Forums and Agreements (contd.) Multilateral Forums and Agreements  General agreements between multiple countries.  Typically, they are industry specific.  Examples: -OPEC -NATO -Asia-Pacific Economic Cooperation -Commonwealth of Independent States

Copyright Atomic Dog Publishing, 2008Copyright Atomic Dog Publishing, Free Trade Agreements: Europe Countries reduce and, eventually, eliminate trade barriers on all goods and services traded between them. Example:  European Free Trade Association -Member countries: Iceland, Liechtenstein, Norway, and Switzerland. -At present EFTA is not an official part of the European Union.

Copyright Atomic Dog Publishing, 2008Copyright Atomic Dog Publishing, Free Trade Agreements: Asia Association of Southeast Asian Nations (ASEAN) -Most successful example of regional economic integration in Asia. -Has its goal to reduce tariffs and create an environment promoting mutual involvement in the development of the region with a goal of creating a free trade area. -Member countries: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam.

Copyright Atomic Dog Publishing, 2008Copyright Atomic Dog Publishing, Free Trade Agreements: Americas  North American Free Trade Agreement (NAFTA) -The goal of NAFTA is to eliminate tariffs and nontariff barriers and to offer free access to companies from member countries to a single market. -Member countries: Unites States, Canada, and Mexico.  Free Trade Area of the Americas (FTAA) -Ambitious plan to create a market of 800 million people and an annual production worth $11 trillion in the current decade. -Derailed, as current focus is on developing Mercosur in South America. -Member countries: the 34 democratic nations of North, Central, and South America.

Copyright Atomic Dog Publishing, 2008Copyright Atomic Dog Publishing, Free Trade Agreements: Africa  Southern African Development Community (SADC) -Free trade agreement promoting economic cooperation among 14 of Africa’s more affluent countries. -Member countries: Angola, Botswana, the Democratic Republic of Congo, Lesotho, Madagascar, Malawi, Mozambique, Namibia, Seychelles, the Republic of South Africa, Swaziland, Tanzania, Zambia, and Zimbabwe.

Copyright Atomic Dog Publishing, 2008Copyright Atomic Dog Publishing, Customs Union Free trade agreement that adopts common external tariffs on products imported from outside the area. Customs unions eliminate or greatly reduce all trade restrictions for member countries, and usually have in place mechanisms to create a common market. Example:  South African Customs Union: -Member countries: Botswana, Lesotho, Namibia, and Swaziland.

Copyright Atomic Dog Publishing, 2008Copyright Atomic Dog Publishing, Common Market Establishing a common market involves:  Eliminating all tariff and non-tariff barriers to trade.  Adopting common external tariffs, and allowing for free movement of capital and labor within the common market.  Example: The European Union reached this stage before establishing a monetary and political union.

Copyright Atomic Dog Publishing, 2008Copyright Atomic Dog Publishing, Common Market (contd.)  Latin American Integration Association -Established in 1980, it comprises the countries of Latin America. It replaced the Latin American Free Trade Association, a failed attempt to create a free trade association that would have comprised all of Latin America. -Member countries: Argentina, Bolivia, Chile, Colombia, Ecuador, Mexico, Paraguay, Peru, Uruguay, and Venezuela.  Andean Common Market (Andean Community) -Eliminated trade restrictions within the Andean region, while providing for uniform external tariffs and rules for foreign investment. -Member countries are: Bolivia, Colombia, Ecuador, and Peru.

Copyright Atomic Dog Publishing, 2008Copyright Atomic Dog Publishing, Common Market (contd.) Southern Cone Common Market (MERCOSUR)  One of the most successful common markets  Member countries: Brazil, Argentina, Paraguay, Uruguay and Venezuela, with associate members Bolivia, Chile, Ecuador, and Peru. Central American Common Market (CACM)  CACM has plans for forming a regional economic union similar to the European Union.  Member countries: Belize, Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua, and Panama

Copyright Atomic Dog Publishing, 2008Copyright Atomic Dog Publishing, Common Market (contd.) Common Market for Eastern and Southern Africa (COMESA)  Plans full economic integration in the near future; however, it faces substantial obstacles due to the political and economic instability in the region.  Member countries include: Burundi, Comoros, Democratic Republic of Congo, Djibouti, Egypt, Eritrea, Ethiopia, Kenya, Madagascar, Malawi, Mauritius, Namibia, Rwanda, Seychelles, Sudan, Swaziland, Uganda, Zambia, and Zimbabwe.

Copyright Atomic Dog Publishing, 2008Copyright Atomic Dog Publishing, Monetary Union  Monetary Unions require a unified monetary policy for member countries.  A monetary union involves, among others: -The creation of a unified, parastatal central bank. -The use of a single currency, or currencies that are in a fixed relationship to each other.

Copyright Atomic Dog Publishing, 2008Copyright Atomic Dog Publishing, Monetary Union Examples  European Monetary Union (also known as Euroland -Created by the 1992 Maastricht Treaty. -Has a common monetary policy. -Has an active European Central Bank. -Uses the Euro as the common currency. -Members of the European Monetary Union are: Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Slovenia, and Spain.

Copyright Atomic Dog Publishing, 2008Copyright Atomic Dog Publishing, Monetary Union Examples (contd.)  West African Economic and Monetary Union -One of the first attempts at economic integration in Africa -Adopted a single currency – the CFA franc. -Has not been very successful in promoting trade within the union. - Member countries: Benin, Burkina Faso, Ivory Coast, Guinea-Bissau, Mali, Niger, Senegal and Togo.  Economic Community of West African States -Strives to achieve complete economic integration and to address impediments to the integration process caused by political unrest and lag in economic development of the region. -Member countries: Benin, Burkina Faso, Cap Verde, Ivory Coast, Gambia, Ghana, Guinea, Guinea-Bissau, Liberia, Mali, Niger, Nigeria, Senegal, Sierra Leone, and Togo.

Copyright Atomic Dog Publishing, 2008Copyright Atomic Dog Publishing, Political Union The highest level of regional integration. Assumes a viable economic integration and involves the establishment of viable common governing bodies, legislative bodies, and enforcement powers. The European Union is the only example of successful voluntary political integration.

Copyright Atomic Dog Publishing, 2008Copyright Atomic Dog Publishing, European Union Member states: Austria, Belgium, Bulgaria, the Czech Republic, Cyprus, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Italy, Ireland, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, and the United Kingdom. Croatia, Macedonia and Turkey are candidate countries.

Copyright Atomic Dog Publishing, 2008Copyright Atomic Dog Publishing, Bodies of the European Union  European Council -The highest policy-making body, it consists of heads of member-countries’ government.  European Parliament -Consists of members elected by direct universal suffrage with representation allocated among member states based on their population. -Debates the policies and legislation in the European Union.  Council of Nations -Consists of representatives from parliaments of member countries and acts as constitutional council that has the power to overrule the Court of Justice.

Copyright Atomic Dog Publishing, 2008Copyright Atomic Dog Publishing, Bodies of the European Union (contd.)  Council of Ministers -The decision-making body (legislature) of the European Union. -Composed of one minister from each member country. -Passes laws based on proposals of the European Commission.  European Commission -The executive body of the European Union. -Subordinated to the European Council. -Consists of a president and commissioners who are in charge of initiating and supervising the execution of laws and policies. -Answers to the European Parliament. -Acts only on behalf of and in the interest of the European Union, and not that of individual member states.

Copyright Atomic Dog Publishing, 2008Copyright Atomic Dog Publishing, Bodies of the European Union, (contd.)  European Central Bank -Enacts the monetary policy for the countries that are members of the European Monetary Union. -Maintains price stability within the European Monetary Union.  European Court of Auditors -In charge of controlling sound and lawful management of the EU budget.  European Court of Justice -The European Union’s equivalent of the United States Supreme Court. -The final court of appeals. -Can overrule decisions of the national courts.

Copyright Atomic Dog Publishing, 2008Copyright Atomic Dog Publishing, Chapter Summary Discussed determinants of regional economic and political integration. Examined levels of integration and the different agreements in each world region. Examined the functions of different policy and governance bodies of the European Union.