Regionalisation of World Politics - 1 | PSIR Optional for UPSC (Notes) PDF Download

Regionalization is intensification of political and/or economic interdependence among states and other actors in particular geographic region.

• In this section we will try to learn regionalization of world politics. Various arguments in favour of / against it.
• How it affects globalization process. And also various regionalization models. Particularly EU,NAFTA, ASEAN, SAARC, APEC, BIMSTEC.
  

Regional Cooperation vs Regional Integration

• Regional cooperation encompasses various forms of collaboration between states, including economic, political, security, and foreign policy cooperation. These are limited arrangements where states agree to work together and are primarily driven by governments.
• On the other hand, regional integration goes beyond cooperation, as it is more permanent and involves deeper connections between societies. While it may be facilitated by governments, it does not always have to be state-led. Specific examples of regional integration include customs unions, common markets, and monetary unions. In some cases, regions may even act with a unified voice on the international stage, especially in matters related to tariff policies.
• Although regional cooperation and integration are distinct concepts, they are not mutually exclusive. In fact, many regional arrangements contain elements of both cooperation and integration.

Why do states pursue regional integration?

States pursue regional integration for several reasons:

• Establishing stable relationships: Newly independent states often aim to build and maintain strong ties with neighboring countries or former colonial powers. This helps them ensure regional security and stability.
• Developing economic and social connections: Regional integration allows states to establish and strengthen economic and social relationships, fostering cooperation and development in the region.
• Expanding markets for domestic production: By integrating within a region, states can expand their markets for domestic goods and services, boosting trade and economic growth.
• Enhancing influence on the global stage: Acting together as a region enables states to have a stronger presence and bigger impact in international forums. This united front allows them to effectively manage and counterbalance powerful nations, like the United States or China. Examples of this can be seen in the European Union and the Association of Southeast Asian Nations (ASEAN), which both have greater influence when acting as a cohesive group.

Implications of Regionalism for Process of Multilateral Liberalization

The implications of regionalism for the process of multilateral liberalization can be both positive and negative. On one hand, regionalism can act as a building block for multilateralism, promoting internal changes within nations that are more conducive to international cooperation. It also serves as a demonstration of the benefits of globalization and cooperation, encouraging countries to participate in larger agreements. Additionally, regional arrangements often have more to do with strategic and political alliances than trade liberalization, so they may have more positive than negative effects on global cooperation.

• On the other hand, regionalism can also act as a stumbling block for multilateralism. Preferential agreements may lead to trade diversion from international to regional markets, and countries may become less interested in global cooperation. Competing arrangements can create conflicts between regional and multilateral agreements, and the creation of multiple legal frameworks and dispute settlement mechanisms may weaken discipline and efficiency in global trade. Furthermore, regionalism may lead to competition and friction between various economic blocs.
• In summary, regionalization is the process of increasing political and economic interdependence among states and other actors within a specific geographic region. While regionalism can have both positive and negative effects on multilateral liberalization, it is essential to consider these implications when working towards global cooperation and trade.

EU: European Union

The European Union (EU) is a prominent example of regional integration that has successfully transformed the strategic environment in Europe. It has been an inspiration and learning source for other regional organizations like the Association of Southeast Asian Nations (ASEAN). The EU has created a zone of peace and prosperity in Europe, which has historically been plagued by continuous wars.

Features of the EU Model
The EU is a complex model of regional integration, often considered a fortress. Its institutions are a mix of national, international, and supranational principles, making it difficult for outsiders to understand. The EU is also an outward-looking body with its own foreign and security policy, focusing on democracy and human rights.

Reasons for the Emergence of the EU
The devastation caused by the two World Wars led European countries to search for a serious alternative to avoid wars. The EU has its roots in the ideas of French Foreign Minister Robert Schuman and statesman Jean Monnet. Additionally, the United States' policy to contain communism played a significant role in the formation of the EU.

Evolution of the EU

The evolution of the EU involves both expansion and deepening, although expansion can create challenges for deepening.

• 1952 European Coal and Steel Community: The original six members were Belgium, Netherlands, Luxembourg, France, Germany, and Italy.
• 1957 Treaty of Rome : This treaty laid the foundation for the European Economic Community.
• 1973 First Expansion : The United Kingdom, Denmark, and Ireland joined the EU.
• 1981 Second Expansion : Greece joined the EU.
• 1985 Schengen Agreement : The EU became borderless.
• 1986 Third Expansion: Spain and Portugal joined the EU.
• 1987 Single European Act : This act established a common market with four freedoms – goods, services, capital, and people.
• 1993 Maastricht Treaty : The European Union was officially formed, denoting monetary union and the introduction of a common currency.
• 2004 Fourth Expansion : 10 countries, including Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, and Slovenia, joined the EU.
• 2007 Lisbon Treaty : This treaty aimed to make the EU more democratic, efficient, and transparent.
• 2012 Nobel Peace Prize : The EU was awarded the Nobel Peace Prize for its contribution to peace, reconciliation, democracy, and human rights in Europe.
• 2013 Fifth Expansion : Croatia joined the EU.
• 2020 Brexit : The United Kingdom left the EU, leaving 27 member states.

EU Organizations

• European Council: The highest summit-level body where EU leaders meet multiple times a year.
• Council of the European Union : A ministerial body responsible for the EU's day-to-day decisions.
• European Commission : The executive arm of the EU, representing its interests.
• European Parliament : Comprised of 705 members who are directly elected through proportional representation.
• European Court of Justice: The supreme court of the EU in matters relating to European Union law.

In conclusion, the European Union has been a successful model of regional integration, promoting peace, prosperity, democracy, and human rights in Europe. Its complex structure and continued evolution demonstrate the potential and challenges of regional integration efforts.

Maastricht Treaty: Common Currency

Advantages
The common currency makes business transactions more convenient and competitive, benefiting not only EU countries but also those trading with the EU. It signifies the integration of markets, and the Euro has the potential to become a global currency. Additionally, it allows relatively weaker economies to attract foreign investment based on the strength of more robust economies.

Disadvantages
If a country faces a balance of payment crisis, it cannot devalue its currency to promote exports. Not every country can join the Eurozone, as they must fulfill the 'convergence criteria,' which includes maintaining low fiscal deficit, inflation, and debt-to-GDP ratio. According to EU norms, public debt should not exceed 60% of the GDP. However, in the case of Greece, the public debt was over 300%. Greece provided incorrect data, leading to the Eurozone crisis, which is also considered a regulatory crisis.

What was the reason for Greek crisis?

The Greek crisis, which began in 2009, can be attributed to several factors, including Greece's entry into the Eurozone, differing economic policies among EU member states, the sub-prime crisis in the US, and the lack of fiscal and economic integration in the EU.

• Greece's Entry into the Eurozone: Greece joined the Eurozone in 2001 despite not being in an ideal economic condition for membership. The EU member states, however, overlooked Greece's economic status in favor of showcasing unity and solidarity. Critics argue that Greece's social security policies, based on socialist principles, reduced the country's competitiveness, while Greece points to Germany's weak labor laws as a contributing factor.
• Differing Economic Policies among EU Member States: The EU is a monetary union, but not a fiscal or economic one, which has led to differing economic policies among its member states. The lack of a fiscal union has made it difficult for countries like Greece to manage their debt and has contributed to the crisis.
• US Sub-prime Crisis: The Greek crisis can also be traced back to the sub-prime crisis in the US. The lack of adequate regulation of financial institutions in the US led to the collapse of several banks, which in turn demanded money from their European counterparts. European banks had lent money to governments like Greece, but when the banks wanted their money back, the governments did not have the funds to repay them.
• Lack of Fiscal and Economic Integration in the EU: The concept of an "Ever Closer Union" was proposed by the EU as a means of integrating economic and fiscal policies. While some countries, like Germany and France, favored this approach, others did not. The Lisbon Treaty of 2007 aimed to streamline EU laws and increase the power of the EU Parliament by introducing a qualified majority voting system. However, the treaty did not go as far as creating an EU constitution, which would have allowed for greater fiscal and economic integration.
• Turkey's EU Membership Bid: Turkey has long sought to join the EU, but its membership has been opposed by countries like Germany for various reasons, such as Turkey's close relationship with the US and its large population, which would give it significant influence in the EU's qualified majority voting system. To prevent Turkey's entry, the EU inducted Cyprus as a member, as Cyprus and Greece are both against Turkey's EU membership.

Various Issues in EU

• Economic Disparities: Persistent economic inequalities between richer northern countries (e.g., Germany, Netherlands) and poorer southern and eastern countries (e.g., Greece, Bulgaria) create tensions over fiscal policy, debt, and recovery funds.
• Energy Crisis : The EU is grappling with energy shortages and high prices, largely due to its dependence on Russian gas and the ongoing Russia-Ukraine war, while accelerating its transition to renewable energy sources.
•  Migration and Refugee Policies: The EU faces challenges in managing migration, particularly with refugee flows from conflict regions, creating divisions among member states on how to handle asylum seekers and share responsibilities.
•  Rise of Populism and Euroscepticism: Eurosceptic and nationalist movements in countries like Hungary, Poland, and Italy challenge the EU’s policies on migration, climate change, and integration, threatening internal cohesion.
•  Rule of Law and Democratic Norms : Countries like Poland and Hungary have clashed with the EU over judicial independence, media freedom, and rule of law violations, leading to legal disputes and tensions over the use of EU funds.
•  Brexit Aftermath : The EU continues to manage the long-term consequences of the U.K.'s departure, including economic adjustments, trade disruptions, and political realignments, especially concerning Northern Ireland.
• Climate Change and Green Transition : While committed to ambitious climate goals through the European Green Deal, the EU faces challenges in balancing green energy transitions with economic growth and energy security, particularly during the ongoing crisis.
• .Geopolitical Tensions and Security : The EU's response to the Russia-Ukraine war has highlighted the need for stronger defense and security policies, as well as the challenges of managing external threats while maintaining internal unity.
•  Technological Competitiveness : The EU is working to boost its digital sovereignty, but lags behind global leaders like the U.S. and China in technology sectors like AI, semiconductors, and cybersecurity, while regulating tech giants.
•  EU Enlargement and Integration: Ongoing debates about expanding the EU to include countries like Ukraine and Western Balkan states face challenges due to political, economic, and institutional concerns, raising questions about the bloc's future capacity for integration.

India - EU Relations

•  Strategic Partnership : India and the EU have formalized their relationship as a strategic partnership , emphasizing cooperation in areas like trade, investment, security, and sustainable development.
•  Trade and Economic Ties : The EU is one of India’s largest trading partners, with a significant focus on goods, services, and investment. However, negotiations for a  Free Trade Agreement (FTA) have faced challenges, primarily over market access and tariffs.
• Climate Change and Sustainability : Both India and the EU share common goals in addressing climate change. The EU supports India’s renewable energy initiatives and green technology projects, enhancing cooperation under the  Paris Agreement.
•  Geopolitical Alignment : As the geopolitical landscape evolves, India and the EU are increasingly aligned in their concerns about security threats, including terrorism and assertive actions from China. This alignment promotes collaboration on defense and security matters.
•  Digital Cooperation : The EU and India are engaging in discussions on digital economy cooperation, focusing on issues such as data protection, cybersecurity, and technological innovation, aimed at fostering a secure digital environment.
•   Global Health and Pandemic Response: The COVID-19 pandemic has prompted enhanced cooperation in public health, with both sides focusing on vaccine distribution, health security, and preparedness for future health crises.
•  Cultural and People-to-People Exchanges: The relationship is bolstered by cultural ties and educational exchanges, promoting mutual understanding through initiatives like the  India-EU Cultural Relations Programme.
•  Political Dialogue : Regular political dialogues at various levels, including the  India-EU Leaders' Summits, facilitate discussions on global issues, enhancing mutual understanding and cooperation.
•  Counter-Terrorism Cooperation : India and the EU are collaborating on counter-terrorism initiatives, sharing intelligence and best practices to combat terrorism and enhance security.
•  Support for Multilateralism: Both India and the EU advocate for a rules-based international order and support multilateral institutions, aligning on various global issues such as climate action, trade reforms, and sustainable development.

 Future Prospects of India-EU Relations

•  Completion of FTA Negotiations : There is potential for concluding the India-EU Free Trade Agreement, which could significantly enhance trade and investment flows, benefiting both economies.
• Enhanced Security Cooperation : Growing security threats in the Indo-Pacific region may lead to deeper security partnerships, including joint exercises, intelligence sharing, and defense technology collaboration.
•  Sustainable Development Goals (SDGs): Increased collaboration on sustainable development initiatives, focusing on climate resilience, renewable energy, and sustainable agriculture, aligns with both parties’ long-term goals.
•  Digital Innovation and Tech Partnerships : Future collaborations may focus on technology transfer, digital infrastructure, and innovation, positioning both sides as leaders in the global digital economy.
• Strengthening People-to-People Ties: Continued emphasis on educational and cultural exchanges can deepen mutual understanding and cooperation, fostering a more robust relationship between citizens of both regions.
• Joint Research and Development: Collaborative R&D projects in areas like health, technology, and climate change can enhance innovation and address common challenges faced by both partners.
• Expanding Energy Cooperation: Increased cooperation in renewable energy projects and energy security initiatives can support both regions in achieving their climate goals and reducing dependency on fossil fuels.
• Addressing Global Challenges Together: India and the EU can play a pivotal role in addressing pressing global challenges such as climate change, health crises, and geopolitical instability, positioning themselves as key players in international forums.
• Enhanced Dialogue on Geopolitical Issues: The relationship is likely to deepen with increased dialogue on geopolitical challenges, particularly in the context of the Indo-Pacific strategy and relations with China.
• Strengthening Multilateral Institutions: Both India and the EU may work together to reform and strengthen multilateral institutions to reflect contemporary global realities, ensuring a more equitable global order.

Overall, the future of India-EU relations appears promising, with ample opportunities for collaboration across various sectors, contributing to a strengthened partnership in a multipolar world.

NAFTA: North Atlantic Free Trade Agreement

The North Atlantic Free Trade Agreement (NAFTA) is a free trade agreement between developed and developing countries, initially proposed by H. W. Bush and implemented by the Clinton administration. The agreement covers trade in goods, services, investment, Intellectual Property Rights (IPR), labor laws, and environmental standards. It was the first free trade agreement between developed and developing countries and had bipartisan support in the USA.

Motivations for Member Countries
Mexico joined NAFTA to attract investment from the USA, gain access to technology, create more employment in the manufacturing sector, and increase exports, particularly in the farm sector. For the USA, NAFTA provided access to cheap labor in Mexico, which enhanced the competitiveness of US products and created jobs in Mexico, preventing legal and illegal immigration. Canada joined NAFTA to access a larger market for its products and as a destination for Canadian investment.

Impact of NAFTA

• NAFTA has significantly increased intra-regional trade, from $290bn in 1993 to $1.1 trillion in 2017. The agreement also increased the USA's farm exports and made the country's automobile industry more competitive. However, job losses were concentrated in a few sectors, and the benefits were spread across the sector.
• Mexico experienced a mixed impact due to NAFTA. The country received more investment from both Canada and the USA and saw an increase in jobs in the manufacturing sector. However, there was a negative impact on agriculture, regional disparity, and increased vulnerability to global economic shocks.
• Canada experienced no adverse impact from NAFTA. The country's exports to the USA increased, and Canada gained significantly in cross-border investment. Consequently, Canada was more interested in the continuation of the deal in its present form.

US Grievances and Demands
The USA had grievances regarding job losses in the automobile sector, protectionist policies in Canada's dairy sector, and the need for tightening rules of origin requirements. The USA demanded higher wages in Mexico, updating IPR norms and digital servicing norms, reform in Canada's dairy sector, and new environmental rules.

New Agreement: US-Mexico-Canada Agreement (USMCA)

• The new agreement, USMCA, addresses most of the US demands. Mexico agreed to increase wages, tighten rules of origin requirements, update IPR norms and digital servicing norms, and accept new environmental rules. Canada agreed to reform its dairy sector and provide greater access to the US dairy sector. Canada also retained Chapters 19 and 20, dealing with the dispute settlement mechanism.
• The biggest gain for the USA is the restriction on Canada and Mexico from concluding free trade agreements with China. The new agreement gives partner countries veto power over free trade agreements with non-market economies. Additionally, the new deal requires tariff-free exports to Mexico's automobile sector only when the product utilizes 75% of parts manufactured in the USA.

Impact on Global Economy

• The new agreement may set a precedent for the USA to impose similar terms and conditions on other trading partners.
• This could potentially contain China economically, but the slowdown of the Chinese economy could also slow down global growth. 
• A decrease in global demand could adversely impact countries like India as well.

Conclusion

In conclusion, regionalization is a process that intensifies political and economic interdependence among states within specific geographic regions. It can have both positive and negative effects on multilateral liberalization and global cooperation. The European Union serves as a successful model of regional integration, while the North Atlantic Free Trade Agreement and new US-Mexico-Canada Agreement demonstrate the challenges and potential benefits of such arrangements. As regional organizations and agreements continue to evolve, it is crucial to consider their implications for global cooperation, trade, and the balance of power.