Debates about and the reasons and significance of regionalism

Globalisation is the increasing interdependence and interconnectedness of states in the world. Economic, political and cultural globalisation are the main forms. Economic globalisation is the increased integration of the world's economies, brought about by increased trade, investment, and capital flows across countries. Political globalisation is the increasing integration of nation-states into a global political system, such as the United Nations. Cultural globalisation is the spread of cultural influences between nations and societies, such as the spread of movies, music, fashion.

Each can be seen to be heightened by regionalism, where states in a region co-operate on an economic, security or political level. For example, attempts by the EU, NAFTA and ASEAN Free Trade Area to increase trade between their member states – an increase in the flows of trade – is directly in line with economic globalisation. This can be seen as a positive or a negative. Many economists see more trade as a good thing for a state’s economy, as it brings greater competition and economies of scale. However, there will always be individual losers who cannot effectively compete in larger and tougher markets. This can lead to scaling back of industries and job losses.

States join regional organisations because they enable the individual states to improve their leverage in the international system against global companies, and to develop their comparative advantage. Regional organisations also defend against globalisation by pooling their sovereignty.

Similarly, political globalisation and regionalism are linked as they are effectively the same thing: the co-operation of states to aid governance and solve mutual problems.

Critics of globalisation criticise regionalism and regional organisations as enhancing and furthering globalisation. They argue that regional organisations are used to create regional economic and political units which are then used to further the goals of globalisation. They argue that regional organisations often favour large multinational companies over local businesses and that this can lead to a loss of local identity and increased inequality. Critics also point to the fact that regional organisations are often used as a vehicle to impose neoliberal policies such as austerity and free trade agreements which can have a negative impact on local populations.

They see the impact on industries, on communities and on jobs brought about by the increasing ease of trade in regional economic bodies like the EU, NAFTA and ASEAN. It is argued that democracy is undermined by supranational or intergovernmental bodies that make binding decisions beyond the reach of the people. These decisions lack accountability, and sovereignty and self-determination are undermined. The EU has been picked out for criticism over the freedom of movement it allows. EU citizens are free to live and work in other states, which has led to significant numbers of people emigrating around Europe. For example, about 750,000 Polish people have moved to the UK in recent years. However, the voting public has no ability to limit these numbers while their country is a member of the EU. This was undoubtedly one of the main reasons why UK citizens voted to leave the EU in June 2016.

Similarly, in the USA, NAFTA has been perceived as leading to the outsourcing of jobs to Mexico, resulting in industry closures and job losses in the US. In this atmosphere, immigrants can be blamed for taking what jobs there are or undercutting wages of ‘local’ people. People who have lost their jobs or feel alienated by the pace of change in a globalised era may blame regional organisations for exacerbating and deepening the process.

Regional organisations and globalisation are also seen to benefit ‘big corporations’ and transnational corporations (TNCs), such as Coca-Cola, GlaxoSmithKline and Unilever, rather than ordinary people. As trade increases and is seen to benefit TNCs over local or national producers, critics argue that consumers are all purchasing the same goods, services and culture. Big corporations with more competitive clout are pushing out smaller companies, leading to cultural homogenisation. States cannot protect their own industries or producers because the terms of economic regional organisations tend to limit this. Some argue that this process benefits the USA most, as it controls much of the culture industry and many globally known products, such as Coca-Cola and McDonald’s. A prime example is the Hollywood film industry, which can produce many popular, merchandisable films in English, which other countries cannot compete against.

Of course, this is a two-way street. Non-US producers also have access to the US market and can sell their goods and services to the Americans. For example, the German and Japanese car industries have been very successful at exporting and selling Mercedes, BMWs, Toyotas and Nissans, which has cost many jobs in the US car industry. Moreover, though there are losers in terms of jobs and industries, most people benefit from globalisation through more choice, cheaper prices and better-quality goods. Protecting industries usually leads to less choice and higher prices.

Regionalism as an answer to Globalisation?

There is an alternative point of view. The EU, among others, would argue that these regional organisations are actually a way of controlling and limiting the impact of globalisation. The EU believes that regional organisations are a way of allowing countries to benefit from the opportunities that globalisation offers while also protecting their own economies and citizens from the negative effects of globalisation, such as job losses and wage stagnation. Regional organisations can also help to ensure that standards and regulations remain consistent across the region and that trade is fair and equitable. For example, the EU has an internal market that is open to all EU citizens and businesses and is regulated by the same rules and regulations. This has helped to provide businesses in the region with access to a larger market and has allowed them to benefit from the economies of scale associated with larger markets. Additionally, the EU has worked to create a social and economic framework that allows for the free movement of people, goods, services and capital throughout the region. This has helped to create a more prosperous and stable region.

Globalisation is a powerful force that can affect the sovereignty of countries, but co-operation and pooling sovereignty is an effective way for countries to fight back. Consider the ability of states, big or small, to control or shape the world they exist in.

Environmental issues do not respect borders: climate change affects every state, sea and river pollution affects all countries, and air pollution does not stop at boundaries. States have come together to try to halt the effects of climate change through the International Panel on Climate Change. States are co-operating to limit the impact of environmental change.

On a regional level, states have come together to limit the power of TNCs and their economic mobility. Some TNCs have more wealth than sovereign countries. For example, Apple has $200 billion in cash reserves – slightly less than the GDP of the entire Republic of Ireland, a country of about four and a half million people. In 2012, Samsung had $196 billion of revenue, more than the GDP of Morocco, with 32 million citizens. This makes TNCs potentially very powerful.

TNCs aim to lower their production costs and their tax liabilities. They will look to produce their goods in countries with low labour costs, lower tax obligations, less rigorous worker safety laws and more lenient environmental protection rules. In this situation, TNCs have huge power. Consider a company that can offer thousands of jobs. States will compete to attract – and keep – its investment. This can lead to a race to the bottom in tax rates, wage rates, health-and-safety laws and environmental and animal protection. It can also lead to huge amounts of state support to attract investment.

By adopting a regional and co-operative approach to these issues, as the EU and NAFTA do, regional organisations can ensure that states do not undercut each other, giving TNCs no benefit from shopping around for the best deal. By working together, states can fight back against globalisation. So in Europe and North America, there are strong environmental protection laws that companies cannot avoid by looking at a neighbouring country; the protections are the same. The more a region adopts harmonised rules, the more level the playing field is in a region.

However, that is not to say that there will be competition between regional organisations. TNCs will seek to lower their costs and try and get regional organisations to lower regulations. States within the regional organisations may be able to stand firmer together under this pressure. Currently, countries of the EU do not harmonise corporation tax at an EU level. There are significant differences in rates around the EU, ranging from over 33 per cent in Belgium and France to 10 per cent in Bulgaria. This means companies do look for the best deal. The Republic of Ireland has been successful in attracting companies like Apple to Ireland due its low corporation tax rates (12.5 per cent in 2016), even though the RoI has strict rules on environmental protection and workers’ rights.

Regionalism can then control globalisation by pooling the power of states against TNCs. Small countries may not feel they can stand up effectively against powerful international firms, but together, standing united, they can win and limit the impact of globalisation. Allied to the above argument is the supposed structural power that can be achieved through membership of regional organisations. Having pooled sovereignty, small states may be more able to stand up to other states or TNCs, and have a stronger voice within global governance organisations. For example, the EU played a significant role in global climate-change talks at COP 21, the climate change conference held in Paris in 2015.

This approach is also true with smaller states facing bigger states. Small states do not have much leverage in trade negotiations with big states: they do not have many consumers to sell to, and may not have much in the way of goods and services to sell. A small country like Malta with 430,000 inhabitants would be unlikely to negotiate a particularly equal trade deal with China and its 1.3 billion citizens. However, by negotiating as part of the EU, Malta can link itself to their 508 million consumers and their products and services, such as German cars and French cheese.

Regionalism can bring protections against the forces of globalisation, both in economic and cultural terms. For example, in 2016 the EU and the USA were negotiating the Transatlantic Trade and Investment Partnership (TTIP), designed to free up trade between them. There are differences of opinion on a number of issues, like the US allowing hormones in their meat and the EU not, and the French seeking protection for its French-language film industry from Hollywood. The EU wishes to maintain geographically protected names in the USA – for example, not allowing US companies to produce ‘Champagne’ or ‘Parma’ ham, which can only come from specific regions in the EU. The logic is that, by negotiating collectively, EU countries will be able to strike a more equal and fair deal. Individual deals can be struck, but the terms may not be as favourable as for a deal struck together.

Shanghai Cooperation Organisation

This regional approach is controversial due to its impact on sovereignty and democracy. By co- operating or pooling sovereignty, states will not be able to control all aspects of the negotiations, and will have to make compromises. However, that is the nature of all negotiations.

Undoubtedly, adopting a regional approach to controlling globalisation has a profound and visible impact on states’ sovereignty and the ability of the people to make their own democratic laws.

For example, the Court of Justice of the European Union has made significant rulings on workers’ rights. The Court has ruled that temporary and agency workers are entitled to the same holiday rights as full-time permanent workers. This applies to all workers in all countries of the EU. One of the arguments for the UK leaving the EU was that it would be free to set its own laws concerning workers and the environment. There is undoubtedly an argument that there is a ‘democratic deficit’ at the heart of the EU, and this is what concerns citizens who expect a democratic say in the way their country is governed.

Global problems need global solutions; regional problems need regional solutions. How will these solutions be achieved? Through regional co-operation, or through formal regional organisations? These increasingly integrated organisations are facing difficulties regarding their legitimacy and effectiveness, particularly from a nationalistic and democratic perspective.

One of the key questions in international relations concerns the future of the nation state and its accompanying sovereignty. The nation state has been an important governing structure for centuries and there is no indication that it is about to be replaced anytime soon. The nation state is a territorial entity that is recognized as a political and administrative unit by other nations and is sovereign over its own affairs. Thus, the nation state enjoys a certain level of autonomy and self-determination. However, recent developments in the international system have called into question the future of the nation state and its sovereignty. The proliferation of international organizations and networks of international cooperation have blunted some of the traditional powers of nation states. Furthermore, the rise of globalization has increased the interconnectedness of economies and societies, making it more difficult for nation states to control their own affairs. At the same time, nation states remain the primary actors in international relations, and the concept of sovereignty continues to be important for maintaining the integrity of international laws and norms. Therefore, while nation states may be increasingly constrained by international organizations and networks, they are likely to remain an important part of the international system for the foreseeable future.