Telo M. European Union and New Regionalism. Regional Actors and Global Governance in a Post-Hegemonic Era
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European Union and New Regionalism
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This dominance of the EU on our mental maps imposes an understanding of
regionalism as bound up with ‘formal institutionalization’. But to equate mature
regionalism with the creation of supranational politico-institutional bodies equivalent
to the European Commission, the European Parliament and the European Court of
Justice prejudices any conclusions we might want to make about the emergence of
a world order based on alternative forms of regional organization and cooperation.
This approach also assumes that key political economy questions pertaining to
economic cooperation can only be addressed in this context. This emphasis on
institutional regionalism proceeding through a mixture of intergovernmental dialogue
and continual progressive treaty revision is at the heart of the now classic model of
economic integration developed over forty years ago by Bela Balassa (1962). Balassa
used the term ‘economic integration’ to refer to the creation of formal cooperation
between states and the forward movement from a free trade area to a customs union,
a common market, a monetary union and finally total economic integration.
Belassa’s four stages of regional economic integration
Free trade area (with the removal of trade restrictions).
Customs Union (with a common external trade policy towards non-
members.)
Common Market (with free movement of factors of production between
member states).
Economic Union (harmonization of economic policies under supranational
control)
This view of regionalism, with its teleological reasoning, also informed the
early neo-functionalist versions of integration theory emanating from American
political science (Webb, 1983). In these explanations of regional cooperation
neo-functionalists saw ‘spill-over’ leading to economic and (ultimately) political
integration. They theorized the transcendence of the state system rather than its
survival. Economic and political integration was driven by rational actors. For a
while neo-functionalists used Europe to generalize about the prospects for regional
integration elsewhere (Haas, 1956 and 1964; Lindberg, 1966; Schmitter, 1971;
Nye, 1968 and 1971). But this was short-lived. The publication of Haas’s auto-
critique, The Obsolescence of Regional Integration Theory (1975), suggested the
very idea of producing replicable models of regionalism was misconceived. Two
problems with integration theory had emerged:
The European experience from the creation of the European Coal and Steel
Community through to the achievement of the Common Market was not
replicated. Analogous projects such as the Latin American Free Trade Area
and the East African Common Market failed.
Integration theory in Europe had underestimated the pervasiveness of
nationalist sentiment and the inter-governmental direction community
policy making had taken (Wallace, 1996 and Moravcsik, 1994 and 1998).
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Explanations of European integration remained complicated by the domestic
politics of the member states.
But, the dissolution of ‘integration theory’ was not just a consequence of the
discrepancies between theoretical predictions and empirical ‘reality’. It was also
marginalized by a growing distaste for grand predictive social theory and a growing
interest in explanations that privileged international ‘interdependence’ as the forerunner
to globalization (see Katzenstein, Keohane and Krasner, 1998). It was only with the
emergence of the single market programme in the mid-1980s that we saw a partial
revival of neo-functionalist integration theorizing. An activist Commission, under
Jacques Delors, offered an empirical reinstatement of the neo-functionalist idea of
supra-nationalism and the single market was suggestive of a number of spill-over into
social policy, economic and monetary union and political integration more generally
(Tranholm-Mikkelsen, 1991). More traditional state-centric accounts of integration,
clinging to outdated realist state theory, failed to capture the ‘everyday’ regulatory
complexity of the European policy process (see Rosamond, 2000).
Interestingly, this reawakening of European integration occurred more or less
simultaneously with the appearance of regional free trade areas elsewhere. The
appearance of schemes in North and South America, the Asia Pacific and Southern
Africa were suggestive of a new regionalized world order, which would be triadic,
with Europe, the US and East Asia as the nodal points. The drivers of this process
were twofold:
The revised, essentially looser, geopolitical security structure that followed
the end of the Cold War enhanced trans-border activity and inter-state
exchange.
The growth of globalization: especially, but not only, the liberalization of
global trade and the deregulation of global financial markets questioned
economic relations founded on the premise of national territory (Held et al,
1999; Scholte, 2005).
Both drivers stressed the fuzziness of the distinction between the ‘domestic’
and the ‘international’. Regional cooperation was thought to enhance global
competitiveness. This general assumption is crucial to comparative analysis of the
European and emerging Asian Experience. Nowhere did regionalism appear to be
getting stronger throughout the first half of the 1990s than in East Asia and the
Pacific. For many, the growth of ASEAN and the so-called ‘Asian way’ to regional
cooperation was a new form of regionalism explained by the need to respond to
globalization (see Acharya, 1997 and 2001). The development of APEC in the early
1990s strengthened this view (see Higgott, Leaver and Ravenhill, 1993) while the
financial crises of the late 1990s challenged it.
2 Beyond Europe: Regionalism in Asia after the financial crises
The financial crises of the late 1990s proved to be a watershed for both the analysis
and practice of regionalism in East Asia. It provided clarity of observation and
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represented a political reality check on a number of issues of regional and global
economic management that had been obscured during the heady ‘Asian miracle’
era of the early 1990s. Despite the hype that accompanied its development
throughout the 1990s, the much-vaunted APEC initiative seemed incapable of even
delivering short-term palliative responses to the regional financial crises, posing
serious questions about APEC as an emergent mode of regional organization
in the Asia-Pacific (see Ravenhill, 2001). This reading was further justified by
the abortive Japanese initiative to establish an Asian Monetary Fund (AMF) in
the wake of the crises. The collapse of this plan in the face of US opposition
highlighted the fragility of a Pacific-wide regional project that seemed dependent
on US blessing.
It can, of course, be argued that APEC was only ever a trade-led initiative,
neither intended nor equipped to deal with financial crises (Harris, 2002). On
the other hand, an argument can be made that the crises opened the way for less
idealistic, more pragmatic thinking about regionalism in Asia (see Higgott, 1998).
In the longer term the crises pushed states to think again about how best to build
a regional order capable of preventing financial crises (or at least competent to
deal with those crises when they arise). The creation of a network of currency
swaps and other financial arrangements arising from, and subsequent to, the
Asian Development Bank meetings in May 2000 reflect this approach to regional
cooperation.
The discussions that have taken place since that time suggest a growing regional
self-definition of ‘East Asia’ as a valid economic space with a discernible political
voice. Analytically, this suggests that such policy initiatives do not simply arise
just as rational spill-overs from financial integration. Rather they depend also
upon an emergent sense of collective identity that frames the way in which policy
elites respond to exogenous shocks. This highlights the centrality of two important
variables in the study of regionalism often over-looked in the economic literature
on regional integration.
The importance of identities in region building;
The catalytic impact on regionalization of exogenous political as well as
economic challenges emanating from the rapid growth of globalization.
Events in Asia since 1996 allow us to identify roles that nascent regional
organizations play as mediating layers of governance between the nation state
and global institutions. In the Asian case this has involved the increasingly less
passive acceptance of dominant western ideologies, preferences and economic
models bound up with the philosophies and actions of the international financial
institutions. This is not dissimilar to the situation in Europe, where the purpose
of such a mediating layer, certainly in the late twentieth century, involved the
protection of the ‘European social model’ against the assimilating tendencies of
deregulated Anglo-American capitalism (Hay and Rosamond, 2000).
We thus need to treat institutions (such as regular forums for regional dialogue)
as socio-political venues or sites rather than just capsules in which rational economic
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action takes place. Observers of regional cooperation in Asia need to recognize the
salience of the relationship between institutionalized interaction on the one hand
and the emergence of regional identities and interests on the other. Rationalists
need not just follow well-worn state-centric paths. Strategic action by state actors
may still be, indeed certainly is, important, but such action must continue to be
placed within a wider complex of actors (both state and non-state) and institutional
venues that conspire to influence the development of regionalism (Hurrell, 1995a).
It is in this context that the role of institutions, and indeed the theory that underpins
institutional growth and activity, is more important than has traditionally been
thought to be the case in the dialogue on regionalism that prevailed in Asia prior to
the Asian financial crises.
3 Why institutions matter and why Europe is different
Institutions are the rules of the game in a society or, more formally, the humanly devised
constraints that shape human interaction. … Institutions reduce uncertainty by providing
structure to everyday life … institutions define and limit the set of choices of individuals’
(North, 1990: 3-4). Institutions are ‘… persistent and connected sets of ruled (formal and
informal) that prescribe behavioural roles, constrain activity and shape expectations’
(Princeton political scientist, Robert Keohane, 1989: 3).
As processes of economic globalization deepen they need to be institutionalized
if they are to avoid increased hostile and negative responses. The continued
liberalization of trade, the deregulation of finance and a limited role for the state
in the process of market globalization requires trusted and legitimated structures
(institutions) if globalization is to continue. The level at which these institutions
will flourish is yet to be fully determined. What is clear is that this cannot be
either/or global or regional. It has to be both. It is a multi-level enterprise in which
the failure of institutionalism at the global level is likely to enhance institutional
thinking at the regional level. As problem solving at the global level becomes more
difficult, enhanced collective action problem solving at the regional level becomes
more attractive.
But much that we have learned about institutions is in danger of being unlearned.
We are correct to point to deficiencies in the UN. We are correct to want to reform it
and the international economic institutions such as the IMF, World Bank and WTO.
What is alarming, however, is a growing willingness to question the very utility of
institutions – as ways of organizing international behaviour – that is growing in
key quarters of the global policy community. Social science has demonstrated the
theoretical and practical importance of institutions as the reducers of uncertainty
and transactions costs and the importance of their role in making promises credible.
We may be cynical about institutions and distrust them but most of us recognize
that if they did not exist we would be re-inventing them in one way or another.
Institutions facilitate deal-making between actors that may be in adversarial
situations. But, institutionalism as a trust-enhancing commitment to principled
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behaviour lacks support at the global level. It is difficult for societal actors to give
loyalty to transaction cost reducers!
Institutional principles developed in the twentieth century
– Institutions lower transactions costs by the provision and sharing of
information
– Institutions reduce uncertainty
– Institutions help make promises and commitments credible
– Institutions facilitate deal-making
– Institutions enhance compliance
– Institutions are vehicles for learning and socialization
– Institutions help shape collective identities.
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These principles do not give us a clear-cut definition of what constitutes an
institution. It is not, for example, always easy to distinguish, in practice, between
an institution and a norm of behaviour. Moreover, for some analysts the concepts
of ‘organization’ and ‘institution’ are interchangeable while for others not all
institutions are organizations. For economists for example, ‘property rights’ are
an institution, and an important one in explaining stability and predictability of
market behaviour under conditions of globalization. For political scientists a key
institution for global problem solving is multilateralism.
It is, therefore, worth recalling the standard definition of multilalteralism as
the management of trans-national problems with three or more parties making
policy on the basis of a series of acceptable ‘ … generalized principles of conduct’
(Ruggie, 1993: 11). The key principles identified by Ruggie are indivisibility, non-
discrimination and diffuse reciprocity. It was expected that over time, decision-
making underwritten by these principles would lead to collective trust amongst
players within an institution. A key element in the development of trust would come
from the willingness of the institutional hegemon – that is the strongest member
of the institution – to agree to be bound by these principles. That is, to accept the
principle of ‘self-binding’ (Martin, 2003).
But it is not sufficient simply to identify the principles inherent in multilateralism.
We must also understand the degree to which these processes do, or do not, deliver
outcomes; the prominence of an international organization (pace APEC) does not
always correlate with a high rate of success in problem solving in a given area of
international relations. Ambitious organizations might try to structure rules and
behaviour in some of the key policy areas of contemporary global politics but often
to little avail. Thus, the decreasing salience of the principal international institutions
has been a growing factor in the search for regional solutions to collective action
problem solving.
Recently, insight has moved beyond the ‘institutionalist’ literature on institutions
to take more account of history, culture and identity. Powerful insights into the
inter-subjective socio-legal context for inter-state behaviour have also emerged (see
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Kratochwil and Ruggie, 1986). These approaches, finding fullest expression in the
constructivist theorizing of the late twentieth century (see Wendt, 1992 and 2000)
which focused less on the role of international institutions as actors and more on
their role as norm brokers (see Finnemore, 1996). States not only use international
institutions to reduce uncertainty and transaction costs. They also use them ‘…
to create information, ideas, norms and expectations … [and] … to legitimate or
delegitimate particular ideas and practices’ (my emphasis) (Abbott and Snidal,
2001:15). Institutions are thus more than arbiters, and trustees, they are also norm
producers, brokers and ‘enforcers’. This is an important theoretical insight that has
only partially found its way into the analysis of East Asian regionalism to date (see
Acharya, 2004).
This discussion of institutionalism has clear implications for the prospects of
enhanced institutionalization taking place in East Asia in the contemporary era
in other ways too. In the language of institutional theory, to what extent are the
processes that are in train in East Asia maximizing information sharing, generating
transparency in decision making and advancing the institutional ability to generate
credible collective action problem solving in a given issue area, eventually (in
some if not all instances) leading to the development of enforcement/compliance
mechanisms and dispute resolution procedures? This is not only a question for
East Asia. There is a general issue at stake. Are we in danger of unlearning these
principles in the early twentiy-first century? Specifically, is the USA unlearning
the message about the role of institutions at the very time when other parts of
the world (including Europe, and notwithstanding the current problems with the
constitutional settlement) are learning of their importance?
But the need for institutions is particularly important in those regions of the
world in which the market economy is less embedded and where these questions
will continue to cast massive policy shadows. East Asia needs to learn the principles
of institutionalism that flourished in the twentieth century. This is not to suggest that
their implementation will follow the same paths in the twenty-first century. Indeed,
what makes East Asia so interesting is precisely the fact that it is a vehicle for
adaptation of some of the key principles of governance behaviour that developed
countries took on board during the twentieth century. The approach adopted by the
EU to institutionalization is unlikely to be replicated in Asia.
If we look at the EU, then, a major purpose of it as an institution has been to
create ‘credible commitments’ amongst its member states in areas where the need
for collective action problem solving has been accepted (Moravcsik, 1998). It has
done so via a pooling and delegation of sovereignty in key areas. This is the main
difference between the EU and other regional integration schemes in the modern
era. Pooling and delegating sovereign decision making is what has given the EU
institutional capacity. Relevant key elements of the development of the EU that
makes it different from other systems to date can be noted:
1. Europe does have a substantial element of integrated governance system,
linking institutional structures, policies, legal instruments that bring
together the national and supranational level of decision making and policy
implementation necessary for the success of any governance system.
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2. In individual policy areas (for example, trade and competition policy)
Europe has a sophisticated regulatory framework unequalled at the global
level. Only Europe has developed a competition framework based upon the
adoption by each state of common standards, procedures and laws. This is a
framework that will not pass easily to the global trade community embodied
in the WTO.
3. The EU governance model relies heavily on the rule of law (see Stone
Sweet, 2004). The role of the European Court of Justice (ECJ) is crucial in
ensuring a system that is both effective and fair. The ECJ has a key role to
play in ensuring the legal provisions of the Treaty of Rome (and subsequent
amending treaties) are upheld by the member state governments, the supra-
national institutions, and by organizations and individuals.
4. Access to the ECJ for private individuals as well as member states and
the supranational institutions makes it distinctive from other international
governance models. Contrast it with the WTO, where only states can make a
complaint to the Dispute Settlement Body. If these legal principles of direct
effect and supremacy were to be fully incorporated into other international
agreements, and particularly in systems of global governance, there would
be a radical change in the effectiveness, the capacity and the fairness of
international and global governance.
5. The EU, for all its shortcomings has managed to instil a spirit of cooperation
amongst a diverse group of member states, succeeded in proving that
cooperation need not be zero-sum and can be learned. In essence, cooperation
within the context of an international governance system produces results
where the participants can perceive cooperative action as a public good.
This is not to suggest, of course, that cooperation among sovereign states or
between states and non-state actors is either automatic or easy. Successful
cooperation to date has depended on a public-sector push and an emerging
supranational structure.
6. The EU has evolved towards a model of governance with a degree of
democratic legitimacy. Despite real criticisms and a literature on the
democratic deficit (for a discussion see Bellamy, 2005 and Moravcsik, 2004)
the EU strives to address the imbalance between the supranational and the
national democratic structures.
7. Europe exhibits some common and distinctive features in its national social
models. Its models of the welfare state face common internal and external
challenges arising from globalization. Within the academic and the policy
communities, the debate about European socio-economic convergence
versus national diversities has aspired to building a competitive ‘European
knowledge society’ consistent with social cohesion. Such a modernization
process does impact (if only in a limited way) on the co-ordination of
national social, economic, employment, research, technology, public health
and enterprise policies.
8. While the European Union has emerged as a major actor in the world economy,
with a reasonably developed and coherent set of trade policies, it is not as
successful as a global political actor. For the EU to be taken seriously in the
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international arena, and to exert influence in the international institutions
that currently form the global governance system, it needs a regional
political identity as an effective and legitimate actor able to represent the
interests of all member states. But finding legitimacy among its citizens and
in public discourse within the EU on the one hand, and among the actors and
institutions of global governance on the other has proved difficult and events
can and do derail these processes (see Reuber and Wolkersdorf, 2002).
9. The European Union has built a dense web of cooperative relations with
countries and regions in other parts of the world. These form a set of
bilateral and multilateral relations linked to trade, aid, investment and other
forms of development cooperation. Determined by historical, political and
geographical factors, these links demonstrate distinctive priorities, value
systems and normative considerations in the negotiation processes and
decision making frameworks, all of which shape the European approach
to reform of the global governance system. Inter-regional cooperation
has increased in both the scope and density of the agreements. Although
often misunderstood, the Asia-Europe (ASEM) process, EU-Mexico, EU-
Mercosur, and the Cotonou Agreements constitute examples of the increased
aspirations of a regional group to build a density of relations and foster trust
and understanding fundamental to a global governance framework.
These developments, and the networking and bargaining surrounding them,
provide many lessons for regional and global governance in general and for
the prospects of institutionalization at the regional level in particular. European
experience (and European scholarship, see Higgott, 2005b) can make a serious
theoretical and practical contribution to our changing theoretical understanding
of sovereignty. European approaches to governance have developed flexible
and multidimensional concepts of sovereignty in the international system which
contrast with the often bounded, state-based/intergovernmental characterizations
of sovereignty and international relations as understood by most US practice and
scholarship and reflected in many other parts of the world where state consolidation
rather than sovereignty pooling remains a principle pre-occupation of a governing
regime. Institutions, especially regional ones, are the essential conduits between
the state and the global economic and political orders. Enhanced global economic
integration requires innovation in thinking about governance at the regional as well
as the global level.
It remains important to make an intellectual leap to overcome these more
bounded notions of sovereignty that beset decision makers in all East Asian states.
The repressive potential of the state remains considerable, especially given the
changing dynamics of international security in the post 9/11 era. We need to escape
from a bounded notion of sovereignty and narrow definitions of security and state-
interest if the global and regional integration process is to deliver better governance
at both regional and global levels. Central to overcoming these limitations must
be the recognition that sovereignty can be disaggregated and redistributed across
institutional levels from the local to the global with the regional level, if the EU
experience is anything to go by, capable of playing an important intermediary
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role. Thus the importance of institutionalism is no mere theoretical indulgence.
How seriously we take it, and in what domains, will determine the nature of
regional cooperation in the early years of the twenty-first century. Institutions
will be important interlocutors in the relationship between globalization and
regionalization, especially as the recourse to regionalism becomes an increasingly
common response to globalization.
Some early depictions of globalization missed the complex interplay in the
relationship between the ‘global’ and the ‘regional’ in the foreign economic
policies of states. These analyses made judgements on technical and economic
change and then extrapolated from them into the socio-political sphere in a manner
for which the evidence was, at best, flimsy. Nowhere was this better illustrated
than in what is often called the ‘hyperglobalist’ literature (pace Oman 1999) which
saw the declining salience of state actors and state borders in the rise of what
Kenichi Ohmae (1995), with a breathless McKinseysque cartography, labelled
‘region states’. In so doing he prematurely reduced the state to the role of a passive
actor in cross-border processes. The ‘hyperglobalization’ thesis misconstrued how
economic space is politically and socially (re)constructed over time. At the very
least, economic regionalization requires governments to sanction the relaxation of
barriers to trade and investment, or, more proactively, to facilitate the provision of
incentives to investment and trade sponsorship.
States are reasserting themselves, but not in the same way in all parts of the world
(Weiss, 2001). In some parts of the world regionalization, seen here as a meso-level
process of state-led governance and regulation, continues to grow in influence in
the early stages of the twenty-first century. But this regionalism will not necessarily
follow the European model leading to some ‘sovereignty pooling’. Europe’s regional
present is not Asia’s regional future. Rather, we are seeing the rise of ‘regulatory
regionalism’ (Jayasuriya, 2004) as state actors develop selective, issue-specific,
strategies to manage regional stability and enhance regional competitiveness in the
face of recognized limitations in the institutional structures of global economic and
political management of the second half of the twentieth century.
5 The new regionalism: Some important lessons from and for East Asia
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It may help if we embed our discussion in the wider context of what has come to
be known as the ‘new regionalism’ that, as Breslin (2005: 6) rightly notes, is ‘a
framework, not a theory’.
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At its core, new regionalism is a response to globalization
and especially a recognition of the inseparability of what Wallace (1990) called
‘informal’ and ‘formal’ integration and Higgott (1997) identified as de facto and de
jure integration. The former refers to integration via the emergence of transnational
space among private market actors. The latter sees integration led by the authority
of governmental actors through agreement or treaty. New regionalism captures the
importance of the ideology of regionalism; that is region building as a political
project rather than one driven simply by gravity models of economic integration.
The new regionalism also has structural consequences beyond the region in which
it has taken place; witness the growth of institutions and organizations, or at least
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discourses, attempting to mediate between regions (such as the ASEM process). If
this occurs in a formalized way we speak of inter-regionalism.
It is increasingly accepted that regionalization refers to those processes of
integration that arise from markets, private trade and investment flows, and from
the policies and decisions of companies rather the predetermined plans of national
or local governments. Regionalism refers to those state-led projects of cooperation
that emerge as a result of intergovernmental dialogues and treaties. But, as in the
relationship between regionalization and globalization, these are not mutually
exclusive processes. Failure to recognize the dialectic between globalization and
regionalization can mean that we impose a regional level of analysis on something
that is actually global or vice versa. We must also consider the salience of extra-
regional relations when considering regionalization.
The growth in intra-regional trade in East Asia is the consequence of the
fragmentation of production across national boundaries. With components
produced across a region, the traded component in the production of a commodity
increases dramatically. But the final goods produced as a result of intra-regional
trade still have to be sold somewhere, be it inside or outside the region. Is this
regionalization or globalization? The dichotomy does not help. The answer is both:
the processes of developing regional production networks are themselves driven by
global processes and are contingent on global markets.
How we map economic and political space is also a concern. Strict national
or sovereign parameters should be avoided when identifying regionalization.
In addition to looking for a correlation between the national state and regional
membership, we should also examine the wider groups and classes of actors that
are involved in processes of integration. The growth of trans-national networks
and alliances that integrate elites, but not usually the wider populations, of a given
country is the key here. Nowhere is this better illustrated than in the context of the
development of APEC, where throughout the 1990s and early twenty-first century
there has been a clear disjuncture between the enthusiasm for the process amongst
intellectual, corporate and bureaucratic elites (if not all political ones) and the
lack of knowledge and disinterest, if not hostility, towards the project in the wider
communities of the member states.
New regionalisms are invariably defined by the rejection of the old, ‘old’ in
terms of both theory and practice. At the level of practice, the first key feature
of the ‘new’ is the sheer number of formal regional arrangements. There are few
countries that are not members of at least one regional organization and most are
members of more than one. This upsurge in regional activity can be explained in
several ways:
The promotion of export growth strategies has advanced the reality of
increased economic regionalization. In this regard, the increased adoption
of varieties of domestic neo-liberal policies is an explanatory variable for
regional initiatives.
An understanding that state actors are but one set of agents among many
is at the heart of newer approaches. Moving away from this old ‘statist’
approach is a defining characteristic of ‘new regionalisms’. Newer
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