Ajit Ranade in The Hindu
Economist Intelligence Unit
Concerns of India’s manufacturing states – A Sarvar Allam in Economic and Political Weekly
Regional economic integration is something usually associated with international trade blocs – the European Union, ASEAN, and so forth. But two of the most important cases aren’t international – they are happening within India and China. Both countries are more populous than any international “region” (excluding of course regional groupings which include either India or China), and both have had very poorly integrated national markets, for reasons to do both with internal transport infrastructure, and the protection of sub-national markets by various means.
Global economic integration – quick, and institutionally shallow – is the hare; regional integration is the tortoise.
Say Rodrik, Zedillo, Frieden & Pettis.
Sadly, I think they’re correct. This is one of the reasons we see governance shifting to regional blocs like the EU and regional mega-states like China.
A brief and cogent talk by Philippines legislator / sociologist Walden Bello.
If your view of international trade is framed by the dichotomy of protected national markets vs. global free trade, then bi-lateral trade agreements and regional trade blocs look pretty much alike: an in-between situtation involving liberalization of trade within small (two or more) groups of countries, beyond whatever has been agreed at the global (WTO) level. Standard trade theory evaluates both by weighing trade creation (within the group) against trade diversion (trade that other countries would have had with members of the group, had the bi-lateral or regional agreement not gone into effect).
If, on the other hand, you see regional blocs in the developing world as instruments for the growth and empowerment of poor countries (h/t Norman Girvan), it’s a difference of night and day.
Economic crisis brings public works programs, which are often slated as protectionist. A public works program (albeit not a “shovel-ready” one) that might seem to be exempt from this criticism is the proposed low-altitude (i.e., all-weather) rail link between Argentina and Chile, subject of a recent a memorandum of understanding between the two governments (h/t Tyler Bridges, McClatchy). And it is certainly true that such a link would facilitate Chilean trade across the Atlantic and Argentinian trade across the Pacific. The more important consequence, however, would be to facilitate regional integration within South America. In keeping with the Pacific-facing orientation imposed by the Andes, Chile is an associate (i.e., peripheral) member of Mercosur; Argentina is a full member, along with Brazil, Paraguay, and Uruguay. The new rail link would bring Chile closer to the fold.
Those worrying about protectionist responses to the crisis most often invoke the example of rising tariffs in the early 1930s. A better parallel would be the end the tariff barriers that went up around the world in the 1870s and 1880s. Those new barriers ended what had been a sort of golden age of free trade, especially within Europe. And yet, the states that built new fences after 1870 were far different from those that had torn them down ca. 1850. Continue reading