Regional integration has a broad paradigm spread over different disciplines, for instance, political science, legal studies, sociology, and economics. Since the definition of Regional integration varies among researchers, it is essential to clarify its meaning in International economics. In international economics, states liberalize trade to take comparative advantage leading towards the formation of trade blocs. After formation, intra-regional free circulation of factors of production and the creation of standard regulations takes place. Regional integration was a nebulous term until the 1980s when the idea of new Regionalism surfaced. Therefore, the idea of New Regionalism drives the regional cooperation in Global South Regional trade blocs ASEAN and MERCOSUR.
The economic definition of regional integration suffers from the theories of eurocentrism and cannot be applied to developing nations because they implicitly rely on the intra-regional economic interdependence as a driving force for regional integration (Krapohl, 2019). Eurocentrism theories cannot be extrapolated because, unlike the EU, the global south countries are economically less integrated, less diversified, and less interdependent with regional neighbors. Therefore, a different rationale drives the process of economic integration in developing countries. The rationale to integrate is not to develop greater economic interdependence but to improve their competitiveness in global markets (Mansfield & Milner, 1999). The global south’s regional trade bloc is driven more by trade with developed nations in the global north, such as the United States and European Union. The integration brings stability to the regional bloc, which attracts foreign capital and investment. However, if only an individual member enjoys the benefit of extra-regional economic privileges, the opportunity cost of regional cooperation increases. The privileged state becomes regional Rambo with a dominant defection strategy and the regional integration stalls. Moreover, the higher domestic-regional development level of countries in a region results in closer integration. Causally, higher regional integration promotes the regional development of countries, for instance, in ASEAN.
Historically, ASEAN started as an alliance between Indonesia, Singapore, Malaysia, the Philippines, and Thailand against the communist threat in Southeast Asia during the 1960s and
70s (Pye & Acharya, 2001). However, ASEAN, after the cold war, restructured itself and followed the paradigm of new Regionalism. Principles of newly formed trade bloc – AFTA (Agreement of free trade agreement) by ASEAN- evidenced that it is not driven by the intra-regional rather extra- regional logic of regional integration.
The regional integration level rose significantly after the Asian crisis of the 1990s by the extra- regional logic of regional integration. ASEAN, as a regionally integrated unit, cooperated with China, Japan, and South Korea. Together, they signed the Chiang-Mai Initiative as a set of bi- lateral swap agreements among ASEAN+3 member states (Dieter & Higgott, 2003). The gains from this extra-regional economic cooperation did not Privilege one of the Asian member States, but all member states profited.
The increasing liberalization and intention to further improve extra-regional economic realism resulted in a threat to less-developed CLMV1 member countries. The authoritarian ruled CLMV were afraid to compete for the shared pool of resources with its developed ASEAN counterparts. Income heterogeneity and ASEAN’s principle- non-interference in other member states’ internal affairs- has halted ASEAN countries from embarking on political reforms. Nonetheless, with its ASEAN charter and AEC, ASEAN prevented the region from disintegrating due to divergent extra-regional interests, which is in sharp contrast to the case of MERCOSUR.
MERCOSUR is a prominent example of new Regionalism in the global south. The extra-regional economic relations and trade negotiations with the EU resulted in the formation of MERCOSUR. Since Brazil’s economic weight drives MERCOSUR, it opted for an intergovernmental institutional structure for MERCOSUR, which was in contrast to the remaining member states’ opinion. During the Asian crisis, investors worldwide withdrew capital from developing countries, resulting in MERCOSUR member states’ economic collapse. To sustain the crisis, Member states wanted coordinated actions of keeping regional currencies stable instead of following unilateral strategies. Contrary to it, Brazil floated REAL without informing its regional member states. Resulting, Brazilian export prices declined compared to Argentina, triggering the Brazilian export boom and Argentina’s financial crisis. Instead of providing necessary regional
1 The CLMV countries are Cambodia, Laos, Myanmar, and Vietnam. These are the newest, lowest income, and formerly closed- economy members in ASEAN
leadership, Brazil became a regional Rambo at Argentina’s cost (Palestini & Agostinis, 2018). Brazil’s behavior can be counted as defection because the regional powerhouse did not coordinate its actions with its regional member states. The extra-regional privilege enjoyed by Brazil came at the cost of the collapsing MERCOSUR market. Moreover, regional integration has failed to keep pace with regional development of the countries. Admittedly, additional integration has stalled in the face of rising protectionism within the region, sparked by Brazils’ currency depreciation during 1999-2000.
This essay has discussed the idea of new regionalism in global south cooperation’s, ASEAN and MERCOSUR. Since the inception of cooperation, no regional member state of ASEAN has solely enjoyed the extra-regional economic privileges. ASEAN has safeguarded the cooperation from disintegrating and subsisted Asian crisis. In contrast, MERCOSUR has been dominated by Brazil – which has relished most of the extra-regional economic privileges. Brazil, without cooperation with neighboring states, took the decision of floating its currency which led to the financial crisis in other regional states. Additionally, it indicates that Brazil does not give priority to regional integration.
Girish Sharma is a Policy Research Associate at Prastaav. He is currently pursuing his Degree in Economics from Symbiosis International University Pune. Apart from research in filed of Economics and Finance, he has keen interest in Public Policy, International Affairs and International Diplomacy.
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