Lecture 29: Regional groupings no. 1: The EU
Regional groupings and globalization.
Today and next week we will be studying
regional integration, which is about the formation of regional trade blocs and suprastate entities.
Among these the most developed is the European Union, which we’ll look at in some detail
today, NAFTA or the North American Free Trade Agreement, the regional group with which
most Americans are familiar, and the ASEAN Free Trade Agreement or AFTA, which we’ll
discuss next week. As we look at regional integration, there are three main questions that will be
structuring the discussion, and that I want you to keep in mind: first, as we’ll discuss in a few
minutes with the EU, does the process of integration involve a sort of necessary progress from
one stage to another, from simpler to always deeper levels of integration, or can the process stop
or even go into reverse? Second, to what extent are we moving beyond the nation-state of the
last few centuries into different kinds of political entities? Third, what is the relationship between
regional integration and regional groupings, on the one hand and globalization: is the regional
grouping a steppingstone to globalization or a shield against it?
The zero level of integration.
Looked at schematically, there are five levels of regional
integration: the free trade area, the customs union, the common market, economic union and
finally, complete political integration. But I want to start with the zero state, in which each
country has its own laws and regulations, including tariffs and other trade laws. As we saw, trade
laws are the results of games between lobbyists representing different interests seeking protection
and legislatures, and the outcome of these games is likely to be a hodgepodge of all sorts of
different tariffs on different products, with a different hodgepodge for each country depending on
how the political games among producers and legislators have worked themselves out in each
country. The GATT and its successor, the WTO, basically set a ceiling on tariffs higher than
which the tariffs of the individual countries cannot be set, but below that ceiling each country can
have its own hodgepodge; and of course there are classes of products, such as agricultural
commodities, that are not covered by multilateral trade treaties at all.
Western Europe left the zero stage with the Treaty of Rome in 1958, and began creating
an economic union. There were two main reasons for doing so, one economic and the other