1.
From industrialization
to the knowledge
economy
The advance
of industry
in the 19th
century made
nation states
central to economic
management.
Industrialization
helped integrate
nations, through
the telegraph,
railway, radio
etc. The modern
state in return
developed the
institutions
which guaranteed
the functioning
of the modern
society: monetary
and fiscal policy,
education, health
systems, policing
etc. Industrialization
consolidated
the role of
the state. Following
the end of the
cold war era
and as trade
and finance
become global,
at the end of
the 20th century,
competition
becomes a world
class affair.
To stay alive
it is not enough
any more to
be able to sell
your products
and services
in your national
cocooned market.
You'd rather
be competitive
at regional
and/or world
level. Progressively,
democratic governments
abandon over-protective
policies and
choose to pursue
policy reforms
to make their
economies more
competitive.
National economies
shift towards
more openness
and grater reliance
on market forces.
At the same
time, inter-dependence
for problems
such as environmental
pollution, immigration,
regional stability
and others make
it increasingly
clear that the
answer must
also be found
at regional
rather than
national level.
In these circumstances
regional integration
became sort
of a buffer
solution to
help absorb
the shock of
globalisation.
One of the central
pieces of the
new era is the
knowledge society.
The distribution
of intelligence
in the form
of patterns,
design, innovation,
software etc.
are more important
than the distribution
of products.
The cards of
knowledge driven
dynamics are
being geographically
redistributed.
Innovation and
knowledge creation
become localised,
but not necessarily
national. Sub-regions
such as California
or Baden-Wurtemberg
can sometimes
prove more intelligent
and therefore
more competitive
than states.
In a series
of different
activities ranging
from traditional
farming to the
protection of
the environment,
EU as a inter-state
organisation
can be more
effective than
its individual
Member states.
2. Power
shift or power
pool?
So far, most
of the existing
regional integration
schemes are
federations
or confederation
schemes which
lead to total
integration
rather than
partial pooling
of common policies
in particular
areas.
The EU integration
model is based
upon Member
states which
abandon their
sovereingty
on a case by
case basis and
when they do
so they take
their decisions
in a totally
voluntary and
sovereign basis.
They do it because
they know that
this is the
best way to
achieve their
purpose in a
more efficient
and effective
way and thus
protect and
promote their
national interests.
They have grown
up sufficiently
to identify
their interest
into a wider
and more collective
project. The
degree of co-operation
is a distinctive
element of human
intelligence.
The Governments
of the individual
Member states
believe that
decisions on
a very large
spectrum of
policy areas
must be taken
at the level
at which they
are likely to
produce the
best results.
However, the
very notion
of national
interest has
changed a lot.
During the 1960
and 70s the
key development
strategy was
import substitution
industrialization
using barriers
to protect 'infant
industries of
national interest'.
In these circumstances
it was only
natural that
any attempt
at regional
integration
was rather inward
looking than
outward. Since
individual countries,
especially developing
ones, had small
economies, it
was felt that
import substitution
would have a
better chance
if pursued at
a regional level.
Recent integration
initiatives
are more outward
oriented and
are no longer
based on protective
barriers or
regional substitution.
Products and
services of
the knowledge
society are
based on discovery
and innovation.
They are produced
through collaboration
and competition,
partnerships
and networks
which bring
together public
and private
bodies and individuals
from many different
countries. In
these circumstances,
and for the
economies of
advanced states,
regional integration
is increasingly
felt as a means
to reinforce
the competitiveness
of the economy
of the individual
Member states.
For Developing
countries also,
regional integration
is undergoing
a fundamental
change: inward
looking protectionism
in their own
economy or at
regional level
has not led
to development.
To adapt to
the new era
and even if
their products
are mainly still
tangible products
of the traditional
economy, developing
countries have
come to realize
that there is
no alternative
to openness
of their economy.
Consequently,
the scope of
regional integration
has been broadened
to cover a variety
of issues beyond
trade barriers.
Such new issues
cover common
technical standards,
competition
policy, investment
regulations
and common policies
to make good
internal infrastructure
deficits between
different parts
of the region,
to boost research
or protect the
environment.
This sort of
deeper integration
of recent regional
initiatives
is mainly due
to the fact
that with the
openness of
their economy,
small economies
feel particularly
vulnerable to
external shocks.
Openness and
globalization
increase interdependence
between individual
countries. In
such circumstances,
some form of
regional policy
coordination
becomes imperative.
Regional organisations
can ensure that
the interests
of their member
states are better
taken into account
in the multilateral
organisations
such as the
WTO or the IMF.
In the present
circumstances,
and as openness
and liberalisation
are now generally
admitted as
necessary even
if not the only
ingredients
for development,
an outward looking
regional integration
is preferable
to a unilateral
liberalization
of the economy
of the individual
countries. Regionalism
can help the
smooth and gradual
integration
into the world
economy and
thus strengthen
the basis for
sustainable
growth.
Moreover, the
new knowledge
economy is starting
to shape the
global economy
on the basis
of networks
of people and
entities rather
than traditional
home country
markets or companies.
Companies are
now turning
more to external
knowledge creating
networks involving
other large
and small companies,
universities,
research laboratories
and non-profit
institutions
including non-governmental
organisations.
In these circumstances
it is clear
that outward
looking regional
organizations
can cope better
than individual
countries. Furthermore,
in the general
instability
that followed
the end of the
cold war era
and at different
occasions it
was generally
acknowledged
that early warning
and early action
to prevent crisis
and cement relations
based on trust
and collaboration
rather than
on distrust
are eased by
regional initiatives:
neighbours tend
to know the
situation better
and may have
more legitimacy
when they ask
their colleagues
to take preventive
measures or
find a regional
solution to
their conflict.
A win-win solution
to a border
dispute over
natural resources
is more easily
obtained between
partners members
of the same
regional organisation
rather than
by individual
states with
no regional
ties.
3. Menu
or à
la carte?
Over the last
years many new
regional organisations
were created.
The Association
of South East
Asian Nations
(ASEAN), the
North American
Free Trade Area
(NAFTA) MERCOSUR
in Latin America,
the West African
Development
Community (WAEMU)
etc.
Do all of them
pursue the same
objectives?
If in general
free trade is
the most common
characteristic
in all, for
some of them
other issues
of regional
interest may
take precedence.
This, among
others, seems
to be the case
for ASEAN, where
following the
latest financial
crisis they
experienced
in 1997-1998,
financial integration
is proceeding
more rapidly.
Recently, ASEAN/3
have announced
a region wide
system of currency
swaps to help
them through
in case of any
future financial
crisis. For
the same reason
they have also
created an early
warning system.
In the future,
they now contemplate
a system widely
inspired from
the early European
Monetary system
with a common
currency basket.
Caricom, the
regional integration
organisation
of the Caribbean
states is now
scheduled to
host the common
Supreme Court
for all the
Member states
of the organisation.
Recently, Hong
Kong and the
Philippines
proposed to
proceed with
a common currency
unit on the
Euro model.
WAEMU was recently
created by shaping
both its objectives
and institutions
on the ones
of the European
Community. It
is clear that
most world regional
integration
schemes are
widely inspired
by the EU model.
This holds for
regional integration
among rather
advanced states
such as the
NAFTA or Mercosur,
or among rapidly
developing countries
such as ASEAN,
or countries
developing at
a rather slower
pace like WAEMU.
What are the
reasons explaining
such a widespread
modeling?
a. The initial
European Communities
transformed
Europe in
an area of
peace, stability
and growth.
Even if in
the initial
stages of
its integration,
Europe was
inward looking
rather than
outward, the
Common Coal
and Steel
Community,
the setting
of common
Competition
rules or the
much criticized
later Common
agricultural
policy contributed
a lot in establishing
a win-win
approach among
Member states-partners
in a common
project. Similarly,
the setting
of common
institutions
such as the
European Commission,
the European
Parliament
or the Court
of Justice,
consolidated
and cemented
this approach
and made possible
to create
an ever deepening
integration.
The EU integration
and policy
coordination
process was
the key factor
which enabled
its individual
Member states
and sub-regions
to avoid decline,
minimise risks
and vulnerability
to imported
shocks and
create new
opportunities
at times of
crisis.
b.
One of the
key characteristics
of the EU
integration
was the flexibility
which characterised
the integration
process. Further
to the initial
commitments
they had to
subscribe
when they
joined the
EU for the
1st time,
individual
Member states
had not have
to give away
sovereingty
in all areas
of future
integration.
They had to
do so, only
when, where
and as much
as it was
needed to
achieve a
purpose they
had agreed
upon. This
was the result
of sometimes
laborious
and frustrating
dialogue between
the different
Member states
mostly concerned
by the issues
involved which
may have kept
the pace of
EU integration
behind schedule
on a lot of
issues. This
slow but rather
stable pace
of advance
helped a lot
in progressively
establishing
a solid ground
of mutual
understanding
and trust.
This further
enabled them
to figure
out a series
of other principles
and practical
ideas based
on flexibility
such as "variable
speed"
in achieving
some of the
commonly set
goals or "variable
geometry"
allowing a
group of Member
states to
move toward
deeper integration
in some areas.
Depending
on the issues
involved some
of the areas
of furth integration
are to be
pursued through
as common
policies by
the established
European institutions,
other remain
Intergovernmental
policy areas
to be agreed
upon by sovereign
Member states
(CFSP) whereas
other areas
such as the
Internal justice
and home affairs
start as Intergovernmental
policy areas
earmarked
to be later
transferred
to the Institutions
of the Union.
In many areas
outside the
core integration
activities
of the EU
where the
treaties did
not establish
specific obligations
to be respected
by all the
Member States,
this "a
la carte"
process helped
a lot the
EU Member
states gain
a lot in effectiveness.
c.
The EU succeeded
not only by
working on
common infrastructure
projects and
common economic
policy areas
but also by
setting some
basic values
as fundamental
principles
to be respected
in its functioning.
The respect
of rule of
law, of Democracy,
Transparency
and good Governance,
became both
implicit and
explicit guiding
rules in all
its internal
and external
policy areas.
These rules
were indeed
seen as a
sine qua non
condition
to overcome
the existing
linguistic,
historical
and cultural
differences
between Member
states and
create a secure
environment
and a high
trust culture.
The highest
trust countries
of the world
are also the
most advanced.
In the circumstances
created by
the Knowledge
economy trust
is likely
to play an
increasingly
important
role in success.
Cooperation
and collaboration
are the basic
ingredients
of the European
Integration
process. Cooperation
and collaboration
are based
upon trust.
The recent
crisis in
the European
Commission,
the implementing
agency and
the guardian
of the EU
treaties,
showed how
important
a high trust
culture is
to regional
integration.
d.
The EU together
with its individual
Member states
support regional
integration
worldwide. Learning
from its past
experience,
EU is now increasingly
viewing third
countries as
partners. PHARE
albeit its shortcomings
is today recognised
as having played
a significant
role in the
stabilisation
process in the
area as well
as in preparing
the relevant
countries of
Eastern Europe
to integrate
the EU. CORDA,
another EU programme
of € 5,3
million is aiming
at rebuilding
the basic infrastructure
in the countries
of former Yocoslavia,
support their
Institutional
and administrative
reform, the
social sectors
reform, the
private sector
development,
the improvement
of infrastructure
networks, the
Environmental
protection as
well as help
them develop
their own regional
integration.
The end goal
is to prepare
these countries
for eventual
integration
into the EU.
The main element
of support by
TACIS for the
countries of
former Soviet
Union is transferring
of know-how
and expertise
to organisations
in the partner
countries. In
January 2000,
the European
Commission committed
€ 3.138
million up to
2006 to support
the Institutional
and administrative
reform, the
social sectors
reform, the
private sector
development,
the improvement
of infrastructure
networks, the
Environmental
protection,
the rural economy
and the Nuclear
Safety.
The new ACP-EU
agreement of
Cotonou, which
was concluded
for a 20 year
period (2000-2020),
and aims at
poverty reduction
and integration
of the partner
countries in
the world economy,
among others,
specifically
provides for
support to regional
integration.
In this context,
and following
a step by step
approach of
trade liberalization,
by Setember
2002 the European
Commission will
begin negotiations
on the establishment
of Regional
Economic Partnership
Agreements with
the ACP countries.
