March 13, 2008

South-South Regional Integration: 11 Potential Positive Consequences for Sustainable Development

« The myriad of forces that are present in “globalization” generate uneven impacts and opportunities both within and between states. One reaction to such unevenness is to advance regionalism to both contain and exploit globalization ».
Boas, Marchand and Shaw (1)

Regional integration becomes very popular among developing countries since the second half of the 90s. This surge of regional agreements, often related to trade, revived a debate on their impact that started with the creation of the today European Union. The surge of regionalism among developing countries it is very important, notably because it contribute to change the geography of trade, growth and power at the global level.

I will focus on South-South regionalism because North-South FTA and RTA pose a number of problems that I will deepen in another post.

The general debate on regionalism was unfortunately hijacked by mainstream economist that they use their standard econometric models (that oversimplify the reality) to find out if such agreements had a positive or negative static welfare impact at the global level. More precisely, they try to understand if regionalism was a stumbling or a building block for multilateralism and to implement free trade globally. This debate was started and driven by Bhagwati (2).

This debate was really partial for the following reasons:

  • It assesses the impact of regionalism only against multilateralism. Nevertheless, multilateralism and free trade are not goals per se. They are tools to improve living conditions of people around the world. We need to assess regionalism considering if it can help to reach sustainable development goals.
  • It takes into consideration only economic and, more precisely, trade dimensions of regionalism. In spite of that, reality tells us that regionalism phenomenon is more complex. In fact, it includes political, social and environmental goals that we will further develop in this post.
  • It uses very imprecise methods to assess regional integration processes. In fact, mainstream economists use econometric tools that can only assess static economic output. Yet, we now that dynamic outcomes are more important and, what is more, we need to take into account both economic and political process to effectively assess an issue.

Nowadays, this old style debate it is still alive. However, new studies with a more interdisciplinary assessment methods and a focus on sustainable development were published the last couple of years. You can find some references at the end of this post.

Before starting to assess regionalism impacts we need to define it in a more precise and realistic way than mainstream economists do (they define it basically as the relationships among countries that are linked by trade agreements both bilateral and plurilateral). I propose the following definition inspired by De Senarclens and Ariffin (3):

Regional integration (or regionalism) is a process in which countries, with a contiguous territory (4), understand their economic, political and social interdependencies and set up political mechanisms to achieve different goals at the national, regional and global levels.

Regionalism adds a governance level. This can be an advantage for developing countries that can negotiate to solve important issues not only at the global or national level but also regionally. The problem is that this can induce them to use less effectively their often poor human resources.

New interdisciplinary studies as well as my personal experience and thinking allow me to underline the following consequences of South-South regionalism that can be valuable to achieve sustainable development goals even if it pose some challenges and risk that should be further assessed. I will synthesize these elements in the following points (that maybe I will develop in other posts).

Political dimension

  1. Reinforcing regionally pacific relationships among countries. Nevertheless, there is a risk that regional blocks by competing with each other will enter in a conflict. This risk is not demonstrated and it does not seem more likely than conflicts among countries.
  2. Embed national public policies in regional rules. This will avoid sudden changes in public policies that reduce the stability of the national system and can have negative impacts on economic growth.
  3. Secure and improve control on boarder regions that often (e.g. Afghanistan-Pakistan boarder) are a refuge for illegal activities.
  4. Improve cooperation on many issues that require a regional action (environmental pollution, disease control, etc.) or that it is impossible to deal in global negotiations (liberalization of trade, social and environmental standards, etc.).
  5. By taking collective actions with other countries, developing countries, especially LDC, can improve their sovereignty, i.e. they can have more power to manage globalization in order to reduce risks and maximize opportunities. For LDC, however, achieving a regional integration project with a more powerful country can be also negative. In fact, the country that is hegemonic in a regional agreement can reproduce the asymetrical relationships that exist between developed and developing countries.
  6. Regional integration can help countries to defend more effectively, as a group, their interests in the international negotiations, both at the multilateral level and at the bilateral level. By adding their resources and their international weight, they can increase their influence in the processes that shape global governance. This could be positive also for multilateralism's effectiveness. In fact, it is more easy to negotiate between e.g. around ten regional blocks than among 190 countries.

Economic dimension

  1. Increasing intra-regional trade. This could be positive because often developing countries can export products, usually more transformed (more positive for their development), that are different from those that they exported to developed countries. What is more, usually also other countries take advantage of this increase of trade flows. In fact, according to Ornelas, «trade creation has been the rule, and trade diversion the exception» (5).
  2. Improving competitiveness of companies. Exporting in the regional market will increase the competition. They can adapt to this competition, less rude, before to enter in international markets. Furthermore, a bigger market can help these companies to reduce their costs (economies of scale). This was also a development path proposed by List.
  3. By increasing the market size, they can become more attractive for foreign investment.

Environmental dimension

  1. Improving environmental competition among countries. Cooperation will be probably more effective because governments will be less scared to lose their competitiveness against other countries. What is more, according to Cosbey, «environmental protection often requires regional cooperation, as with the problems encountered by states that share river basins, that border common seas, that co-host migratory species or that have shared air quality concerns. Regional or bilateral cooperation on trade matters, by creating the foundation of institutional cooperation, yields an opportunity to make related progress on issues of shared environmental concern» (6). Nevertheless, if regionalism succeeds to improve economic development there will be negative impacts on environment.
  2. Regional agreements are also potential examples to be further scaled up at the international level. Regions are spaces to test new ways to solve environmental issues.

In conclusion, South-South regional integration can bring many positive impacts for sustainable development in developing countries. Nevertheless, there is also a number of risks and of problems that have already appeared that I have not deepen in this post. This does not mean that I am not critic on regionalism. I think only that regionalism it is not the evil that mainstream economist show us. Furthermore, regionalism is here to stay. This means that we need to analyze these processes and find solutions to materialize their opportunities and minimize their risks.


(1) Boas M., Marchand M.H. and Shaw T.M., The Political Economy of Region and Regionalism, New York, Palgrave Macmillan, International Political Economy Series, 2005
(2) For a recent book on this topic cf. Bhagwati, Jagdish N. and Arvind Panagariya, eds. 1996. The Economics of Preferential Trade Agreements, College Park : Center for International Economics, University of Maryland.
(3) Senarclens P. De and Ariffin Y., La politique internationale. Théories et enjeux contemporains, Armand Colin (Cursus), 2006, p. 165.
(4) This is an important element because “the imagined region is an example of an imagined community and can form the basis for a construct of the public or common good and of shared responsibility that go beyond the state. Regions can evoke a sense of belonging, which may stimulate people and policy-makers to act in concert” (Boas, Marchand and Shaw, op. cit., p. 173).
(5) Ornelas E., Trade creating free trade areas and the undermining of multilateralism, European Economic Review, 49, 2005, p. 1718.
(6) Cosbey A., Sober Reflection: Considering the Rush to Regionalism, IISD, 2004, p. 10.

Resources for this topic

Boas M., Marchand M.H. and Shaw T.M., The Political Economy of Region and Regionalism, New York, Palgrave Macmillan, International Political Economy Series, 2005

Brown O. et al., Regional Trade Agreements: Promoting Conflict or Building Peace, IISD, 2005

Fugazza M. and Vanzetti D., A South-South Survival Strategy. The potential for trade among developing countries, UNTAD, December 2005

Cosbey A., Sober Reflection: Considering the Rush to Regionalism, IISD, 2004

UNCTAD, Trade and Development Report, Regional Cooperation for Development, 2007

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