The second wave of regionalism

The majority of the regional organizations established during the first wave of regionalism were ultimately considered failures in terms of fulfilling their stated trade and development objectives (Bhagwati 1993: 29). It must be recognised also, however, that major systemic shocks including the collapse of the Bretton Woods system, the oil crises, and the debt crises, limited the ability of groups of developing countries in particular to make much headway in terms of economic development through earlier regional schemes. By the early 1980s many of the regional organizations founded during the first wave had either been disbanded or had fallen into obsolescence.

As a result of the structural changes which emerged with the end of the Cold War and the perceptible increase in neo-liberal globalization from the late 1980s onwards, however, groups of states in many parts of the world once again sought to respond to domestic and systemic challenges through the process of regionalism (Richards and Kirkpatrick, 1999: 685). In relation to the space which emerged for new forms of organisation Fawcett (1995: 18) argues that ‘the collapse of the old bipolar system and the easing of the antagonism which characterized it provide one of the most obvious explanations for the new interest in regional, and indeed in all forms of international cooperation.’ Regionalism is a formal process and as Hveem (2003: 83)

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puts it ‘refers to a programme, an ideology, to a situation where there exists a clear idea of a region, a set of goals and values associated with a specific project that an identifiable group of actors wish to realize.’ While preferential trade liberalization has been the basis on which the majority of regional integration schemes and PTAs have been established during the second wave of regionalism, participating states have often been motivated by a range of factors including inter alia promoting trade and investment, increasing their bargaining power, implementing economic and political reform, and enhancing security (See for example Baccini, 2010; Mansfield, 1993; Mansfield and Solingen, 2010; Pevehouse 2005)

The EU has played an influential role during both waves in terms of inspiring regionalism elsewhere. As Telò (2013: 7) puts it ‘to some extent, the success story of the manner in which the European Union copes with both traditional internal conflicts and national diversities, by transforming states’ functions and structures, plays an important role as a reference (neither as a model nor as a counter-model) for new regionalism elsewhere.’ Initially groups of developing states had sought to replicate the success achieved by the ECSC and the EEC in promoting peace and development in Europe. And following the re-launching of European integration with the Single European Act (SEA) in 1986 and the Single European Market (SEM) in 1992 the EU once again became an inspiration for the establishment of similar schemes elsewhere as well as the re-launch of defunct schemes which had been established in the 1960s and 1970s.

In addition, as will be discussed below in relation to interregionalism, the creation of a large internal integrated market increased the EU’s attractiveness as a partner for states and regional organizations in other parts of the world seeking increased market access as part of their trade and development strategies. It is important to note also that the revival of regionalism was also very much facilitated by the fact that the US started to engage in the process whereas during the 1970s and early 1980s it had been notably absent. The US conversion to regionalism was highlighted in particular by the establishment of NAFTA in 1994.

Faced with the emergence of expansive integrated blocs, on the part of both the EU and the US, many groups of developing countries approached regionalism as a solution to their perceived marginalization in the world economy in the post-Cold

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War era. As Fawcett (1995: 22) argues ‘developing countries have lost their value as bargaining chips in a world where the USA and Soviet Union had once courted them for their favours. Neither aid, nor trade, nor security are assured in the post-Cold War order.’ Having engaged in regionalism in order to avoid marginalization a natural next step for developing country integration schemes has been to seek formal agreements and alliances with powerful states and regional actors such as the US and the EU. In this regard interregionalism since the 1990s has very much been a predictable next step in the process of regionalism.

The integration schemes which emerged during this second wave of regionalism were markedly different from those associated with the first wave. The process of regional integration since the early 1990s has become much more outward oriented and multi-dimensional and is therefore often referred to as ‘open regionalism’ or

‘new regionalism’. In attempting to differentiate the new regionalism from that of the earlier first wave Breslin and Higgott (2000: 340) argue that ‘rather than building (or joining) regional arrangements to enhance independence from the global economy, many developing states now see regionalism as a measure to ensure continued participation in it.’

Regionalism during the second wave has generally focused more on ‘negative integration’ as opposed to ‘positive integration’ (Scharpf, 1996). Whereas positive integration refers to increasing state regulation, negative integration refers to the reduction of such activity through deregulation and the breaking down of barriers to cross border exchange.²⁰ The spread of open regionalism coincided with the initiation of neoliberal reform in many countries and regional integration was often pursued to facilitate the implementation of structural changes as well as to create more attractive markets for inward investment. Whereas regionalism had previously been focused on the internal development of member states through mainly protectionist policies, open regionalist strategies are concerned with promoting welfare gains through integrating groups of countries into the global economy as opposed to shielding them from it. While in some cases this outward orientation has been a conscious choice of the member states involved, it has also often been a direct

20 The agenda of both the EU and the US in relation to PTAs currently, however, is premised on large part on the establishment and enactment of a broad range of regulations in areas such as competition policy, intellectual property rights, and standards.

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result of the policy-space imposed on countries by multilateral institutions such as the World Bank and the International Monetary Fund (IMF) which themselves are controlled by the most powerful state actors. In this regard Doidge (2011: 12) argues that ‘open regionalism is increasingly the only acceptable regionalism.’ It should also be pointed out that regionalism in the modern era has been as much a strategic response to market forces as having been motivated by the ideologies of political leaders.