Sheila Page REGIONALISM AMONG DEVELOPING COUNTRIES Regionalism among Developing Countries Also by Sheila Page HOW DEVELOPING COUNTRIES TRADE TRADE, FINANCE AND DEVELOPING COUNTRIES: Strategies and Constraints in the 1990s MONETARY POLICY IN DEVELOPING COUNTRIES (editor) REGIONS AND DEVELOPMENT: Politics, Security and Economics (editor) EAST ASIAN DEVELOPMENT EXPERIENCE: Economic System Approach and its Applicability, Part III (with Geert L. De Wet, Chris Harmse, James Blignaut, Peter Robinson and Douglas Zormelo) EUROPE 1992 AND THE DEVELOPING WORLD (with Michael Davenport) THE GATT URUGUAY ROUND: Effects on Developing Countries (with Michael Davenport and Adrian Hewitt) TRADING WITH SOUTH AFRICA: The Policy Options for the EC (with Christopher Stevens) WORLD TRADE REFORM: Do Developing Countries Gain or Lose? (with Michael Davenport) Regionalism among Developing Countries Sheila Page Research Fellow Overseas Development Institnte London pal grave macmillan in association with OVERSEAS DEVELOPMENT INSTITUTE * © Overseas Development Institute 2000 Softcover reprint of the hardcover 1st edition 2000 978-0-333-77486-1 All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No paragraph of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, 90 Totten ham Court Road, London W1T 4LP. Any person who does any unauthorised act in relation to this publication may be liable to criminal prosecution and civil claims for damages. 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Transferred to digital printing 2002 Contents List of Tables X Preface and Acknowledgements xii Part I Defining Regions 1 What is the New Regionalism? 3 What is new 3 The regional response 5 Beyond trade 8 Structure of the book 11 2 Why Should Countries Form Regions? 14 Analysing groups 14 Why regions rather than global? 17 Geography 20 Economics 22 Trade 22 Investment 28 Policy arguments 29 Whose interests? 29 Is regulation seen as a benefit or a cost? 31 Traditional public services 33 Fiscal and monetary policy; taxation; redistribution; other macroeconomic action 33 How policy decisions can be divided 33 Social and other conditions 34 Security 38 Bargaining power 38 TheAcquis 40 Trade creation and trade diversion 41 Implications of the arguments 44 3 A Brief History of the Regions 47 Previous regions 49 TheEU 51 North and South America 52 Central American Common Market 53 vi Contents Andean Group 53 The Group of Three 54 CARICOM 54 MERCOSUR 55 NAFTA 56 FTAA 57 SACU 58 SADC 59 AEC 59 AS EAN 59 SAARC 60 ANZCERTA 61 APEC 61 A note on security 62 Conclusions 63 4 What do Members of Regions have in Common? 66 Geography 66 Size of population 69 Economic size 70 Economic sophistication 71 Political congruence 72 Common background or sense of community 74 Summary 76 5 Regulation and Obligations of Regions 81 WTO regulation of regions 81 Restrictions from other international organizations 90 Restrictions from other regions 91 Summary 92 Part II Trade and Investment 6 Formal Arrangements on Trade in Regional Groups 97 TheEU 97 AEC, APEC and FTAA 100 SADC 101 SAARC 101 AS EAN 102 ANZCERTA 102 The Group of Three 102 NAFTA 103 CACM 103 Contents vii ANDEAN Group 104 CARl COM 104 MERCOSUR 104 SACU 106 Summary 107 Rules of origin 107 Safeguards, antidumping, balance of payment tariffs, etc. 111 Allocation of customs revenues 111 7 Trade in Regions 113 Measuring trade in regions 113 TheEU 122 MERCOSUR 122 CARl COM 129 ANDEAN Group 130 Central American Common Market 131 NAFTA 131 Group of Three 136 ANZCERTA 136 ASEAN 137 SAARC 140 SADC 141 Latin America and Caribbean 142 FTAA 143 APEC 148 AEC 148 Summary 149 8 Regulation and Liberalization of Investment in Regions 163 TheEU 168 SACU 168 MERCOSUR 168 CARl COM 169 ANDEAN Group 170 CACM 170 NAFTA 171 Group of Three 171 ANZCERTA 171 ASEAN 172 SAARC 172 SADC 172 Summary 173 viii Contents 9 Investment in Regions 174 SACU 176 MERCOSUR 177 CARICOM 182 ANDEAN Group 182 CACM 183 NAFTA 184 Group of Three 191 ANZCERTA 191 AS EAN 192 SAARC 194 SADC 194 APEC 196 Latin America and FTAA 197 Summary 198 Part III Other Regional Linkages 10 Regionalism beyond Trade and Investment 209 Services 212 Labour mobility 216 Harmonization of business conditions 217 Labour standards 218 Competition policy 219 Environment 220 Intellectual property 221 Standards 222 Trade facilitation 224 Economic policy 226 Public procurement 226 Sectoral policy 226 Border coordination 228 Exchange rates 230 Fiscal coordination 231 Macroeconomic coordination 232 Intra-regional transfers 234 The institutional structure of regions 236 Administration and initiatives 236 Dispute settlement 241 Military and other security linkages 242 Other political and social linkages 244 Summary of links 246 Contents ix 11 The External Relations of Regions 250 Open regionalism and other models 250 Negotiations in Latin America 255 FTAA 255 Other negotiations in Latin America 257 Asian negotiations 259 African negotiations 260 Relations of the regions to the multilateral institutions 261 WTO 262 Other international institutions 265 Relations of the EU with other regions 265 Latin America 266 Asia 270 North Africa and the Middle East 270 ACP 270 Eastern Europe 272 Conclusion on EU 272 US relations with regions 272 Regional relations 273 Summary 274 Part IV Conclusion 12 Regionalism: the Stages between Countries and the World 281 What are the conditions for success of a region? 281 Judgements on each region 285 The interaction between regions and development 288 Regions and the multilateral system 289 Do regions matter? Are there policy conclusions? 293 References and Bibliography 298 Index 313