Regional Economic Integration,

Politics and Trade Policy

Regional Integration
Regional Integration is a process in which neighboring countries
enter into an agreement in order to upgrade cooperation
through common institutions and rules.

•The objectives of the agreement could range from economic

to political to environmental, although it has typically taken
the form of a political economy initiative where commercial
interests are the focus for achieving broader socio-political and
security objectives, as defined by national governments.
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Regional/Economic Integration

Economic integration is an arrangement among nations that

typically includes the reduction or elimination of trade barriers
and the coordination of monetary and fiscal policies. Economic
integration aims to reduce costs for both consumers and
producers and to increase trade between the countries involved
in the agreement.

Economic integration is sometimes referred to as regional

integration as it often occurs among neighboring nations.
When regional economies agree on integration, trade barriers
fall and economic and political coordination increases. 

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Regional Integration Requirements

Regional integration initiatives, according to Van Langenhove,

should fulfill at least eight important functions:
1.the strengthening of trade integration in the region
2.the creation of an appropriate enabling environment for private
sector development
3.the development of infrastructure programmes in support of
economic growth and regional integration
4.the development of strong public sector institutions and good
governance;
5.the reduction of social exclusion and the development of an
inclusive civil society
6.contribution to peace and security in the region
7.the building of environment programmes at the regional level
8.the strengthening of the region's interaction with other regions
of the world
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Recent Trends

The last few years have experienced huge qualitative as well as

quantitative changes in the agreements related to the Regional
Integration Scheme. The top three major changes were the
following:

Deep Integration Recognition

Closed regionalism to open model
Advent of trade blocs

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Trade bloc

A trade bloc is a type of intergovernmental agreement, often

part of a regional intergovernmental organization, where
barriers to trade (tariffs and others) are reduced or eliminated
among the participating states.
Trade blocs can be stand-alone agreements between several
states (such as the North American Free Trade Agreement) or
part of a regional organization (such as the European Union).
Depending on the level of economic integration, trade blocs
can be classified as preferential trading areas, free-trade areas,
customs unions, common markets, or economic and monetary
unions

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 ASEAN – Association of South East
Asian Nations
ASEAN was established on 8th August 1967 in Bangkok, Thailand. There
are 10 member countries of ASEAN including Brunei, Malaysia,
Singapore, Vietnam, Indonesia, Laos, Cambodia, Thailand, Philippines
and Myanmar.

The main goals of ASEAN are to increase economic growth, social

progress and promote regional space and stability.

It aims to transform ASEAN into a single entity. Singapore is the

biggest trading market of ASEAN countries.

As per the trade map, ASEAN exports of goods to the global market
worth USD 890 billion and imports worth USD 846 billion in the year
2017. However, the exports were USD 1183 billion and imports were
USD 1105 billion during 2016.
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APEC – Asia Pacific Economic
Cooperation

APEC also referred to member economies and accounting

approximately 60% of the world’s GDP.
It is responsible for facilitating economic growth, cooperation,
trade and investment in this region.
APEC consists of 21 member countries including Brunei
Darussalam, Canada, Chile, China, Hong Kong, Indonesia,
Japan, Korea, Malaysia, Mexico, New Zealand, Papua New
Guinea, Peru, Philippines, Russia, Singapore, Taipei, Thailand,
United States and Vietnam.
APEC exports of goods stood at USD 8021 billion and imports
stood at USD 7997 billion during the year 2016.
China and United States are the biggest trading countries.

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 BRICS
BRICS is an association of five national economies such as Brazil,
Russia, India, China and South Africa. However, South Africa has
joined this group in the year 2010 and earlier it was known as BRIC.
The total exports of BRICS amounted to USD 2902 billion and
imports amounted to USD 2339 billion during 2017.
China is the largest trading country in terms of both imports and
exports among these countries and recorded 70% of BRICS exports
and 65% of BRICS imports.

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EU – European Union
European Union is the most integrated trade block in the world
and formed in the year 1951. It has built a single Europe-wide
market and also launched Euro as a single currency for regional
trading.
European Union goods exports to the global market worth USD
5887 billion and imports worth USD 5785 billion during the year
2017.
EU consists of 28 member countries which are Austria,
Belgium, Bulgaria, Denmark, Finland, Germany, France,
Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal,
Romania, Spain, Sweden, United Kingdom, Cyprus, Croatia,
Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta,
Poland, Slovakia and Slovenia. European Union comprises five
EU institutions namely European Parliament, Council of the EU,
European Commission, Court of Justice and Court of Auditors.

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NAFTA – North America Free Trade
Agreement/ USMCA

NAFTA was established on 1st January 1994 and comprises

three giant member countries which are Canada, United States
and Mexico.
USA and Canada provide highly industrialized environment for
manufacturing & services growth while Mexico provides
cheaper resources.
NAFTA is responsible to eliminate trade barriers among its
member countries, promote a free trade environment and to
increase investment opportunities.
NAFTA goods exports stood at USD 2376 billion and imports
stood at USD 3262 billion during the year 2017.
United States is the largest trading country among NAFTA
countries.

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CIS – Commonwealth of Independent
States

CIS group was founded in the year 1991 and it is a group of 12

member countries including Azerbaijan, Armenia, Russia,
Ukraine, Kazakhstan, Belarus, Turkmenistan, Uzbekistan,
Georgia, Moldova, Kyrgyzstan and Tajikistan.
According to CIS countries trade data, the contribution of CIS
nations in the world’s exports was 2.6% in 2016, which
declined from 2015’s 3%.
And in world’s imports, countries of CIS region contributed 2%
in both the years.

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 COMESA – Common Market for Eastern
and Southern Africa

COMESA exists as an organization of independent sovereign states

that have agreed to cooperate in developing the regional or global
trade. It is an economic union of southern and eastern African
countries.
It consists of 19 member countries such as Burundi, Comoros, DR
Congo, Djibouti, Egypt, Eritrea, Ethiopia, Kenya, Libya,
Madagascar, Malawi, Mauritius, Rwanda, Seychelles, Sudan,
Swaziland, Uganda, Zambia and Zimbabwe.
COMESA exports recorded USD 65.93 billion and imports recorded
USD 142.29 billion during the year 2016.
Egypt is the largest trader among COMESA countries.

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SAARC – South Asian Association for
Regional Cooperation

SAARC provides a platform for the people of South Asian

countries to work together in a spirit of trust and
understanding. It was founded on 8th December 1985 and its
member states include Afghanistan, Bangladesh, Bhutan, India,
Nepal, Maldives, Pakistan and Sri Lanka.
SAARC exports of goods to the world worth USD 330 billion
and imports worth USD 481 billion in the year 2016.
India is the biggest trading country in both imports and
exports among SAARC members. SAARC organize summits
annually and the country hosting the summit holds the chair of
the association.

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MERCOSUR

MERCOSUR stands for Mercado Comun del Cono Sur which means
Southern Common Market and it was established on 26th March
1991.
It is tariff union of South American countries covering the market of
Brazil, Argentina, Venezuela, Paraguay and Uruguay. Its associate
members include Bolivia, Chile, Colombia, Ecuador and Peru.
 Its main goals are to accelerate sustained economic development.
MERCOSUR is one of the fastest growing trading blocks in the world.
Spanish and Portuguese are the major languages spoken in this
region.
MERCOSUR global exports worth USD 292 billion and imports worth
USD 237 billion during the year 2017.

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European Competitiveness and EU Trade Policy

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Pattern of EU Trade

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EUs Trade Policy

 Main objective is to contribute to growth and jobs

 An effort to see trade policy as part of the wider globalisation
agenda
 To make sure EU addressing the most important challenges of the
global age
 To ensure that EU trade policy instruments are fit for that purpose

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EU is doing well - Performance in the
Global Economy based on a CEPII Study

 The report aanalysed EUs strengths and weaknesses in

international trade
 It did so by examining EU competitiveness by category of
trade through evolutions of EU’s market share vis-à-vis main
competitors

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 EU Performance in the Global Economy
– main findings

 Europe is part of global production chains

 Europe’s trade performance is remarkable
 Europe has strong position in up-market products
 EU leading exporter of services

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Good performance in merchandise trade

 the EU has managed to roughly maintain its share of

the global market
 More important losses for the US and Japan
 China stands out

World Market Share

25%

20%
EU 25
15%
Japan
10%
USA
5%
China
% of total world exports by value excluding energy
0%
1995

1996

1997

1998

2000

2001

2002

2003

2004

2005
1999

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Positive development of trade balance
for manufactured products
 EU’s trade balance has largely improved: +€156.4bn in
2007
 The rise of €100.7bn since 2000 has partially offset the
increasing deficit in energy (+€139.6bn over the period)

Trade balance for manufactured products

400.0
300.0
200.0
100.0

United States
-100.0 Japan
-200.0 China
-300.0 European Union

-400.0

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EU’s Specialisation: Up-market products

 EU’s overall good performance due to an upgrading

of product quality
35%

30%

25%
World Market Share 20%
for Up-Market Products
15%

10%
1995
2004 5%

0%
EU Japan US China

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 EU Specialisation: Up-market
products

 Up-market products = products sold at premium

price due to quality, branding and related services
 Represent 1/3 of world demand and 50% of EU
exports
 Not only luxury goods but across the whole range
of EU exports (intermediary goods, machines,
textiles…)
 Represent the only way to uphold EU levels of
social protection, employment and wages

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 Good performance but the situation
is at risk (I)
 Innovation and High-Tech products are key for future
competitiveness
 EU Market Shares in High-Tech products is below average EU
Market Shares for all products
25%

20%
World Market Share
for High-Tech Products
15%
(2005)

10%

All products
5%
High-Tech products
0%
EU Japan US China

All major competitors lose market shares except China – but US and
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Japan lose more market shares than the EU
 Good Performance in Services
 EU is the largest exporter of commercial services with
28.3% share of world market (US 19.2% ; Japan 5.7%)
 EU’s market share is expanding while US’s is decreasing
and Japan’s is stable

30%

25%

World Market Share 20%

in Commercial Services
15%

10%
2001
2007 5%

0%
EU US Japan China
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Sectoral Competitiveness – EU member
states clustering

Main comparative Dynamic

advantage comparative
advantage

Manufactures Belgium Finland Czech Rep.

Luxembourg Hungary Poland
Germany Ireland Netherlands
Slovakia Sweden, Lithuania
Italy

Services France, Greece, Belgium,

Estonia, Lithuania, Netherlands,
Latvia, Portugal, Finland Sweden
Slovenia, Spain, UK
Partners in Global Leadership
The EU and U.S. work together:
• Fighting terrorism and transnational crime
• Advancing global trade liberalization
• Combating piracy and intellectual property
violations
• Promoting peace, freedom and the rule of
law
 The EU and the U.S.
• Are helping restore peace and stability in
Afghanistan.
• Work together in the Middle East Quartet
to advance the peace process.
• Agree with each other on many policies,
and others tend to follow.
 Shared Values and
Responsibilities
• Freedom & Democracy
Support free elections, good governance, human
rights, and the rule of law around the world

• Security
Fight terrorism, limit the spread of nuclear weapons,
and work for global peace

• Development
Jointly provide 80% of global development assistance
– a larger share of it in times of disaster and conflict
 A Dynamic Transatlantic Economy
• EU and U.S. together account for 40% of total global trade.
• The intertwined economies employ 12-14 million workers on both sides of
the Atlantic.
• Europe is by far the most significant source of foreign investment in the US
economy.
In the U.S.
European companies are the leading foreign investors in the U.S.

The UK, Germany, France, and the Netherlands – top four sources of jobs
created by foreign investment in the United States.

In the EU
American companies invest far more in EU countries than in Asia.
• U.S. businesses make 5 times the profit in the Netherlands - alone - as they
make in China.
• In 2005, EU investments in Texas alone surpassed all U.S. investments in China
and Japan, combined.
 Future of Transatlantic Relations
• The EU and U.S. face common challenges that are global in
origin and impact.
• With global challenges, come global responsibilities.

Future of Transatlantic Relations

The EU and U.S. are natural partners and lead in four key areas:
• Promoting peace, human rights and democracy worldwide.
• Confronting global challenges.
• Fostering prosperity and opportunity.
• Advancing strategic cooperation on energy security and environmental issues.
“We [the United States and the
European Union] are not geopolitical or
strategic rivals. We do not pursue
different visions of global order, based
on competing values. Ours is a win-win
relationship. The US has a lot to gain
from upgrading its relations with the
EU, and vice versa.”

A NEW ATLANTICISM FOR THE 21st CENTURY

José Manuel Durao Barroso,
President of the European Commission
26 March 2010