GLOBALIZATION

AND
REGIONALIZATIO
N
The Processes of
Globalization and
Regionalization
■Reemerged during the 1980s and
heightened after the end of the
Cold War in the 1990s.
■At first, these two processes are
contradicting since globalization,
by definition is global while
regionalization is naturally regional.
The Regionalization of the world
system and economic activity

■Undermines the potential

benefits coming out from a
liberalized global economy. Why?
■Because regional organizations
prefer regional partners over the
rest.
Regional Organizations
■Respond to the states’
attempt to reduce the
perceived negative effects of
globalization.
■Therefore, regionalism is a
sort of counter-globalization.
In a 2007 survey,
■The Financial Times revealed
that majority of Europeans
consider that globalization
brings negative effects to
their societies (as cited in
Jacoby and Meunier, 2010).
Many Policy Makers and Scholars
■Think that globalization must be
regulated and managed.
■The threats of an “ungoverned
globalization” can be countered what
Jacoby and Meunier called managed
globalization; it refers to “all
attempts to make globalization
more palatable to citizens” (p.1)
It is important, however, to
consider the gradual
development of Inter-regional
relations such as:
■1. The Association of South
East Asian Nations (ASEAN)
■2. The European Union (EU), or
■3. The South American Trade
Bloc, Mercosur.
“Contagion Effect” (Held et al.,
2005, p.77) has spread during
the past years.
■What is a Contagion Effect?
■A contagion is the spread of an economic crisis from one
market or region to another and can occur at both a
domestic or international level.
■Many academics and analysts see contagions as being
primarily symptomatic of global market
interdependence.
■Usually associated with financial crises, contagions can
be manifested as negative externalities diffused from
one crashing market to another.
■ (AKHILESH GANTI https://www.investopedia.com/terms/c/contagion.asp Updated Sep 9, 2019)
“Contagion Effect” (Held et al.,
2005, p.77) has spread during
the past years.
■ Contagions are typically associated with the diffusion of
economic crises throughout a market, asset class, or
geographic region;
■ technically, it could also refer to the diffusion of economic 
booms.
■ Contagions occur both globally and domestically, but they
have become more prominent phenomena as the global
economy has grown and economies within certain geographic
regions have become more correlated with one another.
■ Many academics and analysts see contagions as being
primarily symptomatic of global market interdependence.
(AKHILESH GANTI https://www.investopedia.com/terms/c/contagion.asp Updated Sep 9, 2019)
Regionalization in one part of the
world encourages regionalization
elsewhere…
■…whether by limitation, like the
success of the European Single
Market, or by defensive reaction,
such as Mercosur’s establishment
as response to the creation of
NAFTA.
North American Free Trade
Agreement (NAFTA)
https://www.inc.com/encyclopedia/north-american-free-trade-agreemen
t-nafta.html
■It is a treaty entered into by the United States,
Canada, and Mexico;
■it went into effect on January 1, 1994.
■(Free trade had existed between the U.S. and
Canada since 1989; NAFTA broadened that
arrangement.) On that day, the three countries
became the largest free market in the world-;the
combined economies of the three nations at that
time measured $6 trillion and directly affected
more than 365 million people.
North American Free Trade
Agreement (NAFTA)
■It was created to eliminate tariff barriers to agricultural,
manufacturing, and services; to remove investment
restrictions; and to protect intellectual property rights. This
was to be done while also addressing environmental and labor
concerns (although many observers charge that the three
governments have been lax in ensuring environmental and
labor safeguards since the agreement went into effect). Small
businesses were among those that were expected to benefit
the most from the lowering of trade barriers since it would
make doing business in Mexico and Canada less expensive
and would reduce the red tape needed to import or export
goods.
According to the prior statement,
Regionalization and the development
of interregionalism would indeed be
global in nature.
■Held et al. (2005) claimed, “The New
Regionalism is not a barrier to political
globalization but, on the contrary,
entirely compatible with it – if not an
indirect encouragement.” (p. 77)
Contagion
■ In a domestic market, it can occur if one large bank sells
most of its assets quickly and confidence in other large
banks drops accordingly. In principle, the same process
occurs when international markets crash, with cross-border
investment and trade contributing to a domino effect of
closely correlated regional currencies, as in the 1997 crisis
when the Thai baht collapsed. This watershed moment,
the roots of which lay in gross excess of dollar-
denominated debt in the region, quickly spread to nearby
East Asian countries, resulting in widespread currency and
market crises in the region. The fallout from the crisis also
struck emerging markets in Latin America and Eastern
Europe, which is indicative of the capacity of contagions to
spread quickly beyond regional markets.
A Brief History of Financial
Contagion
■The term was first coined during the 
1997 Asian financial markets crisis,
but the phenomenon had been
functionally evident much earlier. The
global Great Depression, triggered by
the 1929 U.S. stock market crash,
remains an especially striking example
of the effects of contagion in an
integrated global economy.
Hurrell (2007) captured this debate
in his “one (global) world/many
(regional) worlds relationship” (p.1)
■Regional developments in one part of the
world have affected and fueled
regionalization everywhere else in a sort
of contagion or domino effect. This fact,
along with increasing developments in
interregional cooperation, shows that the
regionalization process is global in
nature.
Therefore,
■Regionalization is intimately linked to globalization since
it is part of it and it builds on it. Thus, it claimed:
■“The age of economic globalization has also been the
age of regionalization, and much of the analysis of the
new regionalism has been devoted to the links between
the two tendencies. Thus, regionalism is seen as critical
part of the political economy of globalization and the
strategies that states (and other actors) have adapted in
the face of globalization…The emergence of regionalism
needs to be understood within the global restructuring of
power and production. The many worlds are very closely
intertwined with the character and face of the one. The
core driving force is global even if the manifestation is
regional. (Hurrell, 2007, p.4)
Sweeney, 2005, p.203 said,
■“Globalization goes back to when
humans first put a boat into the sea.”

Jacoby and Meunier, 2010, p.1 said,

We can understand globalization as
“the increased flows of goods,
services, capita, people, and
information across borders.”
What do Region and Regionalization mean?

■Region is a group of countries in the

same geographically specified area.
(Mansfield and Milner, 1999)

■Regionalization is “the societal

integration and the often undirected
process of social economic
interaction.” (Hurrell, 2007, p. 4)
So, what is Regionalization?

■Regionalization is the
formal process of
intergovernmental
collaboration between
two or more states.
(Ravenhill, 2008, p. 174)
One of The Reasons behind Regionalism
are:
■The concern for security, which is to
insure peace and stability.
■Confidence building that can be
enhanced through economic
cooperation within a region.
■The ASEAN and the Shanghai
Cooperation Organisation (SCO) are
regional organizations that seek strong
security in Asia through cooperation
What did Huntington (1996) believe
about culture and identity?
■He believed that culture and identity guide
regionalization.
■As he put it, “In the post-Cold War world, states
increasingly define their interests in
civilizational terms” (p.30)
■For him, culture and identity are civilizations.
■He identified 9 major civilizations:
Western, Latin America, African, Islamic, Sinic,

Hindu, Orthodox, Buddhist, and Japanese.

Huntington (1996)

■He argued that international

organizations like EU or
Mercosur share a common
culture and identity and are far
more successful than NAFTA,
whose member states belong
to different civilizations.
Huntington (1996)

■If we follow his idea of the “clash

of civilizations,” one could argue
that the potential for such clash
can be strong in Asia. Why?
■Because many of those
civilizations are, at the least, can
be found in the region.
What is the main motivation behind
contemporary regionalization?
■Economic motivations are arguably the
main motivation behind contemporary
regionalization. By entering regional
organizations, Asian states may regain
some control over flows of capital and
enhance their bargaining power against
transnational economic actors such as
investment groups or transnational
corporations (TNCs) (De Martino and Grabel,
2003)
What is the main motivation behind
contemporary regionalization?
■Aside from what was mentioned, domestic
companies may benefit from belonging to a
regional market big enough to allow them
scale economies while still being protected
from global competition. In other words,
regional organizations allow national
companies the opportunity to succeed in a
protected but big enough market in a way
that they would otherwise fail if exposed to
global competition.
What is the main motivation behind
contemporary regionalization?
■Finally, non-state actors, such as TNCs,
act as a driving force toward
regionalism. These TNCs, whose
countries are not part of a given
regional trade agreement, find
themselves in a disadvantaged
commercial situation with respect to
competing companies belonging to the
regional organization in question.
What is the main motivation behind
contemporary regionalization?
■Given this situation (mentioned a
while back), Ravenhill (2008) said
that disadvantaged TNCs will lobby
their national government to sign
similar trade agreements in order
to end their disadvantaged
commercial situation.