Is Regional Integration Contributing to, or Inconsistent with Globalization - Report Example

Is regional integration contributing to, or inconsistent with globalization? Whether praised or booed as a blessing or a sham, one reality about globalization cannot be discounted. As a worldwide phenomenon—that aims to achieve an international economic integration and unity among nations—open market principle has in one way or the other affected, influenced and shaped the lives of people in the world already. And yet, however, the debate about this economic model’s true nature, its doctrines and its feasibility to succeed, has so far, divided many people from several nations. Among them, will unification among regional nations such as in East Asia contribute to the success of globalization? Or will such approach run counter against this neoliberal market dogma? Heart of free economy In principle, open market policies when adopted is deemed an easy-way-out solution to the problem of endemic poverty. In the lengthy and thick discussions about globalization, the bottom line of the talks has always been the same: a) Were the haves-not lifted from the misery of the vicious poverty cycle when the world’s economies knit together as perfectly envisioned by globalization? b) Are we finally seeing a new world order whereby the gap between the rich and the poor nations will finally be bridged and that wealth will be distributed equally to the wide margin of the population? and, c) Are poor people being victimized in the ruthless bottleneck competition among the big, global players? Of course the answers will depend as to who is asked. The intricacies and complexities of globalization is best understood by looking into the two side of those who are against and who support it. In the early 1980s, three of the world’s most influential leaders: Ronald Reagan, Margaret Thatcher and Helmut Kohl evangelized many nations about a newfound approach to economic growth: a free global economy. The dogma that soon became known using the moniker Washington Consensus was very fresh then that it ushered the so-called “one-size-fits-all” approach to development: 1) privatization, 2) government deregulation, and 3) fewer to zero barriers to trade and financial flows. What would the power and influence of these leaders be if not put to good use so before long, the neoliberal dogma of market-opening policies were pressed on dozens of poor, indebted countries by no less than the World Bank (WB), the International Monetary Fund (IMF), and the United States government.1 At the onset, there was economic surge in terms of trade and foreign investments. Large and multinational corporations enjoyed the growth as well. It was an economic miracle nations are long waiting for in all these years and made consumers happy too. With trade at the heart of globalization, its architects realized an open market will bode well to prosperity aspired by nations. East Asian countries adopted open trade as one of its bread and butter. In a report, countries like Japan, Korea and Taiwan and the once-upon-a-time sleeping giant China has since embraced trade in the mid-70s. The result for them was positive: more than 300 million of its citizens were redeemed from the clutches of poverty.2 In effect, what this showed to us is that poverty is glamorized when growth is shunned through self-sufficiency, some observers noted. But it seems the economic boom that was felt in globalization’s first few years was after all a thud. The heavy toll was felt even more by the marginalized poor, the laborers and the environment. Soon, citizen protests erupted more and more as the 1997-98 economic crisis that plunged millions into poverty in Asia, Russia, and Brazil are blamed to this global economic approach.3 This means, activists and protesters may also be right after all in batting that more evidence still need to be shown where a country that embraced globalization as an economic dogma and adopted its teachings has ever achieved economic prosperity over the long term.4 Protectionism that is slowly reemerging over the recent years as a principle was noted for floating the economies of powerful countries like the United States, Germany, France and Japan it is said. Among the characteristics of a protectionist regime is the unwillingness to open up and to resort to economic mantra it deemed would protect its homegrown industries from outside or foreign competition.5 In addition, investors are required to buy products made locally and to build local know-how. By being protective of its resources, countries are never hesitant to put barriers to inward foreign direct investments (FDI), a practice otherwise deemed illegal by the rules of trade nowadays. Globalization as a force of nature New York Times journalist Tina Rosenberg, who evaluated globalization’s far-reaching impact to society and the world’s economies in general, assessed how powerful and strong this phenomenal global economy has become. If she is to be asked, Rosenberg deemed reforming globalization’s dogma is a must and never too late to address. However, she felt such power is not irreversible, citing its own troubles, iniquities and malady that may soon draw disillusioned countries from withdrawing because they deemed see globalization effective in marginalizing or harming the poor.6 In his Time article, ‘End of Poverty’, Jeffrey D. Sachs traced that there was a hellish historic regime in most parts of the world that suggests a more violent process of poverty creation. He said this was first manifested through slavery and rooted in unequal power relations, the colonial legacy of export economies, the presence of extraction industries, and the sale of natural resources by governments to the highest corporate bidders. These, Sachs believe are the circumstances that plunged many nations to extreme poverty.7 Economic globalization, observed by United Nation’s Development Program’s Jan Vandermoortele, has in fact contributed to a large extent to the widening lull between the affluent beneficiaries and the marginalized within most countries; and to a growing divide between most poor nations and the close circle of the wealthy nations. As evinced by many studies, growing inequality within a nation falls hardest on the poor.8 The mere mention of these thoughts after all lead us to finding ways to to answering one question after another about the role globalization can do to alleviate poverty. Since globalization was borne out of the need to provide an economic stimulus that will eradicate impoverishment, but then it seems the path is mushy and hazy to reach the destination mapped out then as achievable and realistic. For supporters, globalization was portrayed as a process of peeling away of its infirmities to unveil a fresh and elegant system of global commerce, one nature intended. But this remains to be proven. This might not be as surprising after all when the 22,500 pages long accord creating the World Trade Organization is to be reviewed. Critics said the evangelism of globalization only contemplates to benefit the powerful nations and powerful interests within those countries.9 If the rich and powerful would only benefit, how then would the poor, third world nations compete then? If nations could not compete with bigger, powerful states, how would gains be reaped out of globalization, and in turn can go proportionally to the other nations and its citizens? Under the right condition, few nations thrived under globalization Under the right conditions, China, Chile and other nations has proved an open economy may give a nation its much needed boost to help trim down poverty level and lift the poor out of impoverishment. Chile, for example managed to make its poor thrived, citing the strong political will by its government to make globalization reforms to happen. Under its democratic government, Chile designed a program that will allow gains from its economic integration to be distributed equally for its poor citizens.10 Mexico is another good example of country that was able to learn strategies it will adopt to survive globalization. Given Mexico’s proximity to the largest markets in the world, it chose to adopt the assembly of imported parts as strategy to capitalize on its human resource, that in turn spurred growth economically out of its product: export of medium- and high-technology products.11 But if there are countries like Chile and Mexico who benefited by opening its markets, Korea on the other gained by imposing technology transfer and by closing its economy. But not all are successful in establishing trade barriers to create industries through exporting.12 Among the arguments presented in this regard is that in closed economies, where in theory governments are given the hand to help the poor, in reality, however, it is the privileged few like a dictator’s sibling who sometimes take full control of industries. China and India, two of the biggest nations in Asia, did manage to lift from poverty its poor citizens in the 1990s. But neither nations blindly followed the policies of free trade, government deregulation and fiscal austerity. What these two nations did instead were to select and carefully open some markets while leaving others to the exclusive domain of domestic firms.13 Out of this, government control then help counter to a large extent what an open market can do at the expense of the poor just to enrich the large businessmen and corporations. Enter regional integration Would any regional merger of countries make it competitive then in the wave of globalization? Out of Europe’s experience when its countries merged through the European Union (EU), the similarity between the dogma of globalization and regional integration becomes very evident: freeing barriers in the flow of macroeconomic elements for the global economy to thrive. This approach proved positive as among the best ways in strengthening and reinforcing policy actions in trading, foreign investments, market surveillance, financial flows and balance of payments. Like globalization, freeing several economic barriers within countries complemented the vision of Europe for full integration among and between its regional nations. In an European Commission funded study, the unification of countries in the European region gave it the leverage from other nations in the world to compete. As to how the merger was envisioned to develop, flow of goods, services, people and capital was freely moving minus the interruptions or distractions brought about by complex barriers at each nation’s territorial domains and other non-tariffs barriers. The creation of an economic and monetary union and the adoption of a single currency market helped spur and consolidate Europe’s vision for a consolidated and more unified and single financial market.14 The eventual success of the European Union’s single market program, an ambitious project of high-reaching structural reforms in almost all economic sectors, aside from the positive support provided by global trade liberalization, afforded key support for the progress made within the Economic and Monetary Union and the launch of the single currency. These goals and visions invariably expedite the development of systems for policy coordination, which then aid in the full compliance of other member nations for better macroeconomic policies and structural reforms in the markets for goods, labor and financial products to be established. The European Union model, according to Robin Broad and John Cavanagh, may actually be one fine alternative to the “free-trade, free-investment-flow” model under globalization principles. One essential feature of this regional integration model was the support it extends in aiding poor member states like Ireland and Portugal through careful and well-targeted resource transfers and the setting of common and (high) labor and social rules.15 In Latin America’s Venezuela, its government earmarked part of its high revenues from its oil reserves production to fund new regional initiatives, in hopes of countering a United States-proposed corporate-led integration. In addition, Venezuela offered subsidized oil to several neighboring countries and 12 Caribbean nations (as well as to low-income people in several communities in the United States). Apart from this, the Venezuelan government attempted to negotiate trade agreements that put environmental, social, and equity goals on an even par with economic goals. The governments of Brazil., Argentina, Uruguay, and Paraguay have likewise fashioned a regional integration pact that gives workers a place at the negotiating table.16 . Will an East Asian regional merger likely to follow? In some ways, Asia and Europe may be similar yet different in terms of political vision, economy and timing to integrate. Here are as follows – 1) Economic pattern. Asia has a more diverse economic resource in terms of member nations that comprised it: some are rich, some are extremely poor, mostly with rural and traditional structures. European countries, however, are more homogenous when it comes to their economic health; 2) Timing regional merger. More willing politically and explicit in its intent, Europe has since started pushing for the shift after World War II in 1945. Unlike Asia which does not seem to feel the pressure to integrate the same way that Europe did. Such reflected an uncomfortable low political will to address the de facto integration to take shape. Asia’s very different geographical, historical and economic conditions may have contributed to this level of political ambition.17 Using Zhang Yunling’s checklist of Asia’s identity, which are – geographic, economic, political, and others –Europe and Asia share similarities in terms of the following – 1) both regions are interested in systems that encourage open international economic and financial program as it contend with scarce natural resources; 2) having survived the serious blow of economic, banking and currency crises in the nineties (i.e., Europe with 1992-1993 ERM crisis and Asia with 1997 financial crisis), partly as a result of efforts undertaken to achieve stable economic and financial system; and 3) complex models of society are very apparent in both regions, putting high alert for them to adopt policies that will keep them attuned with the forces of globalization, yet flexible enough to adapt in any rapidly evolving contexts.18 Should necessity dictate integration? Real convergence is said to be implied by necessity. It may be an effort that can be pursued in trying to get a full grasp of an economic meaning out of the vision and efforts for regional nations to integrate and form an alliance aimed at reaching a lasting macroeconomic and financial sector stability. But this formula is never worth the effort if the member countries will not design programs that will channel wealth among its poor nations that will in the end finally help its poor people. East Asian region is one interesting area with its rich, divergent culture, socio-economic policies and strategies, and human resource when jibed with sound regional policy efforts can help it sustain growth and development in the long run. However, one criticism about regional integration in Asia is its lack of clear direction.19 While institutional integration moves are costly, demanding and obligatory, however, it is still worth the risk for Asia to follow. Taking cue from Europe, this regionally wealthy pool of nations, pressed for unification to cushion the pressures of rising competition from the powerful United States and to thrive in a globalized world. It cannot be ignored nor denied Europe’s transformation into a regional economic behemoth as it is known now was never without its own dose of bitter medicine. The pressures and tiresome challenges it met along the way for in completing integration, particularly in view of the conditions or policies it will be ready or willing to take, adopt or risks losing, may seem insurmountable to thread but Europe was able to hurdle. Today, it is still accelerating the phase of its full adoption of this economic design. By so following the footsteps of Europe, Asia can then become more equipped to catch up with Europe and US. To recall that in globalization, nations must adjust to enable it to ride the call of the risky global economy, and integrating may be one of the solutions for Asia to look into. While expectations and enthusiasm by the US and Europe to support integration in Asia are high, however, under all circumstances, there are fears that such ambition may not work in reality. While such integration initiatives must become fully in synch with global multilateral accords, sometimes though, aspirations and idealism must be realistic. Especially when comparing Asia’s prospects for regional alliance and Europe’s successful bid to integrate. The approaches may be similar yet can still be adopted based on a realistic projections, study of regional cultures and the extremes in the nations other characteristics (e.g., economic, citizen culture, government, policies, and many more). There are big and pressing issues that also need thorough attention for policymakers to review and evaluate to hammer out an economic integration that may become more efficient and practical than competing in the global arena as one. It must also be determined whether such interdependence effort is leading Asia towards freeing much trade barriers in the region. In expanding trade activities, it would be necessary then to free or cut impending barriers to undertake transactions with member nations and outside. Should lobbying to promote or support national interests of certain parties be allowed? Should Europe be the bigger beneficiary or the US? Or should a level-playing field be established instead? In building an East Asian alliance, the role and extent of participation of bigger and powerful nations like China, Japan and India should also be drawn out clearly and carefully. This is necessary to allay fears of domination over the smaller nations by these nations.20 What will fully drive or compel Asia to adopt such regional integration may be its consideration of its long term potential to achieve growth and when the gains it will get from such growth it can proportionately distribute among the poorer nations. Apart from globalization, cross border elements such as environment, terrorism threats, military threats and common resources management, may encourage Asia to adopt the model used by Europe in its process of integration and cooperation that proved effective (i.e., rationales to be determined, multilateralizing bilateral pacts, private sector involvement). However, if we will follow the optimism showed by John Micklewait and Adrian Wooldridge who believed that winners in a globalized economy far outnumber the losers, then we hope to see the day when integration will make all nations winners and there will be no losers. But to date, the whole idea about globalization remains very dynamic, fluid and enchanting. Rosenberg is correct that it is never too late to reform the model of globalization to make it pro-poor and not only pro-rich. Today, it is no longer an issue whether globalization can alleviate poverty because this part is not consciously contemplated in the first place. Only until such time that this is considered, will issues about globalization can perhaps be discussed more intently and nations should really start sitting down again to talk in roundtables. Now again we ask, Were similar regional grouping initiated in Europe and Latin America, and when followed by Asia, proved to be consistent with the mantra of globalization? The answer is yes and no. Yes, there are evidence that leads us to believe the consistency of the regional integration model with globalization because it espouse free trade among nations. However, in the long run, we can say that while globalization is battling protectionism, we can no longer tell whether such syndrome would emerge when unification of nations by region are achieved. But as long as we can hope, then perhaps everyone is free to believe that while globalization is not only a great thing, it is a monumental leap forward in mankind’s history. Today, we can only wait and see where the wheels will lead us. Hopefully, for the good of all. Bibliography ___________, 2004, ‘Asian Regional Integration Coming of Age, Baker Says’, America.gov, 7 June < http://www.america.gov/st/washfile-english/2004/June/20040607170235ASesuarK0.8383295.html > [Accessed 9 June] ______________. 2004, ‘Asian Economic Integration - Current Status and Future Prospect’, Research Institute of Economy, 4, Feb., < http://www.rieti.go.jp/en/events/02042201/report_23pm.html> [Accessed 8 June 2008] Broad, Robin & Cavanagh, John. Summer 2006, ‘Hijacking the Development Debate’, World Policy Journal, vol. 23, no. 2, pp. 22. Malik, Mohan, 2005, ‘The East Asia Summit: More Discord than Accord’, YaleGlobal, 20 December [accessed 9 June 2008] Rosenberg, Tina. 2002, 'Globalization', New York Times, 18 August., pp. 34. Sachs, Jeffrey D. 2003, ‘End of Poverty’, Time, 14 March 14 Sejeve. Kenneth F. & Slaughter, Matthew J. 2007, ‘A New Deal for Globalization’, Foreign Affairs, 4, Summer, pp. 34-47 . Shearer, Derek, 2000, ‘The Big Store’, The New York Times, 9 July [Accessed 9 June 2008] Soesastro, Hadi, 2003, ‘Regional integration initiatives in the Asia pacific: Trade and finance dimensions’, Pacific Economic Cooperation Council, 1 Sept., [Accessed 9 June 2008]. Vandermoortele, Jan. 2002, ‘Are we Really Reducing Global Poverty?’, United Nations Development Program, July, pp. 2-3. Read More