Regional Economic Integration - Literature review Example

Regional Economic Integration Name: Institution: Regional Economic Integration It is conventional knowledge that the world economy has increasingly been riddled with a strong wave of intensified economic integration especially within the sun set years of the twentieth century. Globalization parameters such as the development in trade and the liberalization of capital accounts, in tandem wit technological innovation have greatly internationalized the exchange of the factors of production and the inherent trade (Fernandez & Mommen, 2002). Although many discourses have been coined to in support of the process of globalization as the liberalizing vehicle, there has been a parallel growth in the economic grouping within geographic regions. This implies that as the world becomes more globalized, it is concurrently becoming more regionalized. The increased recognition of regional economic blocs through regional policy initiatives in trade has energized the trend toward regional economic integration. Despite the proliferation and increased value in the regionalized trade zones, economic integration bears unanswered questions that underlie the thesis of this paper. This critical analysis explores and details the discourse of regional economic integration and its underlying implications on the liberalization of global market. Particularly, the paper will interrogate the emerging questioning of the discourse as a building block or is it a barrier of global integration. Economic Blocs and Free Trade Agreements The primary theme promoted by regional economic integration is that the core principles (openness and non-discrimination) bolstering the integration reflect the common goal, though at slow pace of building a global free market. According to Frankel, Stein and Wei (1997), before painting the bigger picture of global integration, it is worthwhile visiting some of the important preconditions for regional economic integration arrangement in order to form a clearer analogy for assessment of the role the blocs in the eventual destiny of liberalized markets. For the purpose of this work, frequent inferences will be made on the European Union (EU) and the trade blocs in the Eastern Asia because of their apparent force as regards the match towards global integration. It is crucial to note that while the goals and processes of initiating the regional economic blocs and free trade agreements may be similar in different geographical regions, the end products may be distance apart. For instance, the EU model of integration yielded more to policy-drivers in which attention from institutions and governments helped make the integration processes the basis of integral institutions and agreements. However, owing to differences in institutional and governmental support for the East Asian integration model, it has come out as a market-driven regional economic outfit (Frankel, Stein and Wei, 1997). The East Asian economic bloc has been a fertile ground for analysis of the potential outcomes: global integration or strong stand lobe economic blocs. This bloc is driven by markets and the corporate linkages, which is strengthened by the development of resilience of regional and foreign corporate production networks. According to Frankel, Stein and Wei (1997), the corporate internationalization and increased market liberalization have built intra-industry trade in a myriad of aspects and reflect greater advancement toward more production-sharing strategies and evolution of more cross-frontier agreements promoting global integration. It is noteworthy that regional economic integration is a crucial conduit toward global market liberalization. This premise is supported by Carbaugh (2010) who conceded that while the East Asian and European contexts differ with respect to the institutional support for the processes, the political message about the importance of enlarged economic integration and free trade covenants is explicit. The argument for the match toward global integration with regional integration as the building blocks extracts from the popularity of the blocs and agreements. Steps made in EU especially of consolidating crucial political and economic functions within the bloc and from individual country can fairly be referred to as near liberalization. Additionally, market driven integration particularly in the developing economies: intergovernmental cooperation and informal policy trade policy arrangements chronicles support for more market cooperation across national borders. The initiatives by governments to strengthen existing or previously relaxed frameworks and the agreements for promotion of trade relations are pivotal instruments of facilitating regional production cooperation that enhance governmental and economic stability. The trade blocs encourage the free movement of labour, and promote infrastructural development that enhance economic and trade expansion. Finally, the resulting economic empowerment realized through economic integration positively influences the regional talent development, which is a crucial facilitator of internationalization of the global market. The Process of Global Integration Before analyzing the proliferating regional economic blocs to discern their roles in the liberalization processes, it is crucial to grasp a sense of the market liberalization discourse and underlying processes. According to Carbaugh (2010), the liberalization discourse extracts from a gradual and virtually open-ended process through which amalgamating economies or corporations annul discriminatory or aggressive policies and other trade barriers among them. The integration processes requires coherence of ideology and policy mechanisms, and shared scheme of realization of the commonly set objectives. When regional blocs enter into trade agreements under conventional covenants that provide for shared deliverables and implementation procedures, the room for growth and establishment of performance culture within the region becomes hard to suppress. Additionally, proper delineation of strategic sequence of agreement actualization sets ground for practices that bear cross border ideology, which make it easy to replicate in afar geographical trade area and thus development toward global integration. Economic Integration: Building or Stumbling Blocks for Global Integration Notwithstanding the supportive premises fielded in this text in regard to regional economic integration as the bridges leading to the global integration, market liberation is characterized by utter ambiguity. Liberalization, viewed from the lens of a regional integration is greatly a function of the removal of extant or potential barriers to trade. Moreover, liberalization addresses the ubiquitous discrimination claims leveled particularly by developing economies against their well established partners. This implies that liberalization bears a dual character, which supports a dichotomy of ideals with one side viewing regionalization as a stumbling block and the other viewing regional blocks and free trade agreements as the viable paths towards the realization of global integration. According to (Carbaugh, 2010), domino theory of regional integration, the facilitation for the accessibility to a rather long locked economic development resources works as a puller force that draws more liberalization aspects. The dynamics of the liberalization processes emanates from inherent changes in the trade environment that while making trade partners feel lesser pinch in economic investments, makes non-members incur greater costs in doing business within the region. Moreover, the myriad of avenues for trade cost diversion owing to closer market cooperation within the bloc will encourage non-members to seek more political inclusion, which may not be possible if they develop cold feet in joining the economic zone. As has been demonstrated by the EU, the reciprocal liberalization enhances members’ pro-trade political and economic cooperation. This precedence gives exporting members an upper and in bargaining for lower tariffs as a way of reducing foreign tariffs, which works significantly in dissolving existing or potential protectionist culture. In pursuance to this premise, national authorities represent the local traders by arbitrating between them and exporters thereby easing the challenges confronting liberalization. This argument implies that the sector that is subject to such extent of arbitration can finally become liberalized. In the absence of the global economic integration, it is imperative that regional economic integration suffices the next better option for the purpose of pursuing free trade especially within the region. Depending on the vantage point, economic integration can be seen to represent building blocks for ultimate liberation of global markets (Frankel 2007). For instance, large regional blocks like the EU has effectively masked their constituent members from direct participation in trade discussions with global institutions such as the World bank and the world trade organization (WTO), and now participates in such contexts as one strong entity. The international business has increasingly been riddled with policy regulations as regards different aspects of the merchandise: quality, identity of origin, security, environmental concerns, and food safety. This development has called for free trade agreements and regionalization of components of trade as economies scramble for place in the international market. The apparent implication in this context is that regionalization serves as the easy way for standards within the international markets to be regularized, which makes liberalization realizable. However, another school of thought views regional integration as the primary barriers for eventual global liberalized market. For example, the apparent protectionist acumen established by China can hardly lead into liberalization path. The surge in Chinese relevance in the global market may impose a domino extracting from its desire to protect its domestic industries from international competition (Frankel 2007). Although China has partially succumbed to the capitalist market habits, the remnants of its traditional communist and protectionist behaviors exacerbate the discriminatory aspect of regionalization that effectively derails the liberalization process. Although regional trade blocks reduce the discrimination pressures to free exploitation of economic resources, the slow development of the institutional frameworks slows down the dream of global integration. Because policy instruments are drawn by the local leaders with the interests of the bloc at the core, the desire to protect the significance of the region in the global trade arena denies liberalization a chance to really grow. Conclusion This review revolved around the continuing practice of economic regionalization that has become the newest trade precedence. The primary objective of any regionalization ideals is to expand the trade zone and market, which presents the institutions as the building blocks for liberalization. Conventional standardization of market items and trade practices makes regionalization as the best conduit through which liberalization trickles. However, the protectionist tendencies geared towards safeguarding regional position in the international markets curtails the role of regionalization as a means toward liberalization. Although regional trade blocks reduce the discrimination pressures to free exploitation of economic resources, the slow development of the institutional frameworks slows down the dream of global integration. References Carbaugh, R.J. (2010). International economics. (13th ed). London, UK: Cengage Learning. Frankel, J.A. (2007). The regionalization of the world economy. Chicago, IL: University of Chicago Press. Frankel, J.A., Stein, E., & Wei, S. (1997). Regional trading blocs in the world economic system. New York, NY: Peterson Institute. Jilberto, A.E.F., & Mommen, A. (eds). (2002). Regionalization and globalization in the modern world economy: Perspectives on the third world and transitional economies. London, UK: Taylor & Francis. Read More