THE LOGIC OF REGIONAL

INTEGRATION-
EUROPE AND BEYOND
WALTER MATTI
IN TODAY’S LECTURE WE WILL…

• Define regional integration

• Scale of integration
• Economic Integration
• Single Market
• Free Trade Area and Customs Union
DEFINTION OF REGIONAL INTEGRATION
ACCORDING TO EU WEBSITE

• Regional integration is the process by

which two or more nation-states agree to
co-operate and work closely together to
achieve peace, stability and wealth
CRITICISM….

• However, free trade areas have been

criticized both for costs that are associated
with increasing economic integration and
for artificially restraining free trade
 SCALE OF INTEGRATION 0 TO 10

• This co-operation usually begins with economic

integration and as it continues, comes to
include political integration. We can describe
integration as a scale, with 0 representing no
integration at all between two or more countries.
• 10 would represent complete integration
between two or more countries. This means that
the integrating states would actually become a
new country — in other words, total integration
SCALE FROM 0-10

Economic Political Integration

0 Integration 5 10

No Single Market Total

integrat Integrati
ion on
Economic integration 

• is the process by which different countries agree to

remove trade barriers between them. Trade barriers
can be tariffs (taxes imposed on imports to a
country), quotas (a limit to the amount of a product
that can be imported) and border restrictions.
• For example, Canada, Mexico and the United States have
formed the North American Free Trade Agreement (
NAFTA), which reduces trade barriers between the three
countries.
• Integration scale NAFTA- 2 since Canada, the U.S. and
Mexico are still free to set their own trade barriers on
goods from other countries.
SINGLE MARKET

• The single market is the midpoint of the integration

scale between political and economic integration. It is
the point at which the economies of the co-operating
states become so integrated that all barriers to the
movements of labour, goods and capital are removed.
At this stage…..

• a common external tariff on goods from other

countries–this is called a customs union.
• adoption of a common currency, with monetary
policy regulated by a single central bank.
POLITICAL INTEGRATION …..

• a single market, there appears a need for common

policies in social policy (education, health care,
unemployment benefits and pensions)
• and common political institutions.
 POLITICAL INTEGRATION CULMINATION
OCCURS….

• When the co-operating countries are so

integrated that they share the same foreign
policies and merge their armies. In effect,
they form a new country.
FREE TRADE AREA

• A free trade area is a region in which a group of

countries has signed a free trade agreement
 and maintain little or no barriers to trade in the
form of tariffs or quotas between each other.
•Free trade areas facilitate international
trade and the associated gains from
trade along with the international
division of labor and specialization.
CUSTOMS UNION

• A customs union is an agreement between two or

more neighboring countries to remove trade barriers,
reduce or abolish customs duty and eliminate quotas.
• Such unions were defined by the General Agreement
on Tariffs and Trade (GATT) and are the third stage of
economic integration
DIFFERENCE BETWEEN FTAS AND CUSTOMS
UNIONS…..??

•  The difference between the two is that in a

customs union, the participating countries
set a common customs tariff (a single
external tariff applied by all members) against
third countries, while in an FTA, they do not.
• This results in other differences: (i) under a
customs union, the participating countries must
engage in trade negotiations as a single entity
(typically the EU)
• while in a FTA, the members may negotiate
individually
• in a customs union, free movement
of goods is allowed among the
member nations, versus in an FTA,
it is not;
CUSTOMS UNION-EU
FREE TRADE AREA-NAFTA
REGIONAL –OLD OR NEW?

• Different Leagues and Commonwealths pacts

confederations, councils are spread throughout
history-
1. Staatenbunde
2. Bunderstaaten
THEORIES OF REGIONAL INTEGRATION

• Nation-state as the most important centre of

analysis in international relations started
losing its position because nation-state itself
was affected by many transnational
phenomena, which it was unable to control.
FUNCTIONALISM….

• The logical answer was to look beyond the nation-state and shift
the stress of study from territorial to functional activities so that
a kind of integration among the hitherto sovereign nation-state
could be achieved.
• This theoretical base was provided most notably by the
functionalists and its critics who propounded a modified version
of it.
EECONOMIC INTEGRATION THEORIES

• The market economics of Western Europe which

were severly destroyed by World War II
considered economic integration among the
nations more practical, although political
integration was being talked about since signing
of the League Treaty in 1919.
• Economic integration is mainly a post-War
phenomenon, .
• And it was with the Marshal Plan for the reconstruction
of Europe that the term came into official use.
•Economic integration is
mainly a post-War
phenomenon.
• Regional integration theory started with a
broad comparative regional and
organizational scope in the 1950s and 1960s,
it has since focused on European integration
and the European Union.
• Main (families of) theories explaining the
development of European integration – rather
than decision-making and policy-making in the
EU – are intergovernmentalism,
neofunctionalism and postfunctionalism
•The debate has been between
variants of intergovernmental
and neo-functionalists
INTERGOVERNMENTALISM…..

assumes national governments to be the key

actors in regional integration. Governments use
regional integration to maximize their national
security and economic interests in the context of
regional interdependence.
INTERGOVERNMENTALISM…

•Integration outcomes result from

intergovernmental bargaining and
reflect the regional preference and
power
INTERGOVERNMENTALISM…

• Governments delegate authority to

regional organizations to secure their
bargaining outcomes but remain in
control of regional organizations and the
integration process.
NEOFUNCTIONALISM….

•Disputes that governments

are able to control the
integration process.
NEOFUNCTIONALISM….

• Transnational corporations and interest

groups as well as supranational actors are
empowered by the integration process and
shape it in their own interest.
NEOFUNCTIONALISM….

• In addition, integration creates a variety

of “spillovers” and path-dependencies
that push integration beyond the
intergovernmental bargain.
THERE IS ALSO POSTFUNCTIONALISM…

• As regional integration progresses and undermines

national sovereignty and community, it creates
economic and cultural losers who are mobilized by
integration-sceptic parties. Identity-based and populist
mass politicization constrains regional integration and
may even cause disintegration.
•Especially in the early days of RIT,
theorists distinguished integration
from (simple) international
organization or cooperation.
• In addition, early theorists often defined
regional integration teleologically as a
process aimed at some form of federal polity
superseding the nation-state
• Current RIT views integration as an open-ended process; it
normally avoids both qualitative and teleological
definitions beyond the minimal definition above. It
employs terms such as “supranational” and
“intergovernmental” to classify types of RIOs rather than
to distinguish RIOs from other organization.
QUESTIONS THAT
RIT ASKS?
• Why states decide to establish and how they
design regional integration. Second, RIT asks
under which conditions and how RIOs expand
their tasks, competencies, and members over time.
• Third, it is interested in feedback processes.
What impact do RIOs have on the states and
societies in their regions and how do these
impacts condition the future development of
RIOs?
• Finally, it theorizes about comparative
development. Why are some RIOs,
countries, or issue areas more integrated than
others – and why do some stagnate or
disintegrate whereas others progress?
HISTORICAL DEVELOPMENT OF RIT-
NEOFUNCTIONALISM TO POSTFUNCTIONALISM

• Regional integration first emerged as a distinct

area of study in the 1950s. The paradigmatic
political science RIT at that time was
neofunctionalism represented by scholars such as
Ernst Haas, Leon Lindberg, Joseph Nye
• Federalism was predominantly a normative
theory and transactionalism was concerned with
community-building more broadly than with
RIOs. The advent of neofunctionalism coincided
with the first wave of RIOs in the aftermath of
World War II and decolonization.
• At this time, neofunctionalist regional integration
theory was part of the IR debate between “idealism”
and “realism”. Neofunctionalism drew on and
elaborated the functionalist theories of international
cooperation and organization at the core of IR idealism.
• They stipulated ways to overcome the balance of power
behavior and recurrent warfare that realists considered
endemic features of international politics. The upswing
of supranational economic integration in the Europe of
the 1950s appeared to contradict realist assumptions
about the primacy of state autonomy and power.