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Saturday, Sep. 24, 2011

Integrating the econ outliers


MOSCOW — A rule of thumb in the realm of international economic cooperation goes like this: The more developed the partners, the more advanced the toolkit servicing industrial cooperation and the bigger the benefits from integration.

This notion applies both to "classic" regional integration and to newfangled "twinning" of economies, like that happening between the United States and China.

Among the best arranged integration systems are the European Union, NAFTA (North American Free Trade Agreement), the mechanism of CER (Closer Economic Relations) in Oceania, Mercosur and the Andean Pact in South America, as well as some sophisticated economic projects with the participation of the more advanced members of the Association of Southeast Asian Nations and their neighbors (like "ASEAN Plus Three" and "ASEAN Plus Six").

As for the least-developed economies and whole regions, we find more or less real and normally working arrangements of an integrative nature only occasionally and in rather primitive forms — such as SAARC (South Asian Association for Regional Cooperation) and SAPTA (South Asian Preferential Trading Arrangement) in still very poor and disintegrated South Asia, or Caricom (Caribbean Community) encompassing several "dwarf-states" in the Mexican Gulf, or ECOWAS (Economic Community of West African States) in equatorial Africa.

Yet, on the whole, Africa can hardly be regarded as completely forsaken by major economic players. The vacuum created by decolonization is gradually filled by the economic presence of the former metropolis — individually and collectively through the mechanism of association with the European Union and, of course, the United States, Japan and the ever more active and omnipresent China.

Though intraregional integration schemes, which are in abundance, are typically "skidding," the political dialogues have begun and are becoming more substantial.

Unfortunately, there are also some hopelessly failed states, "black holes" like Sudan and Somali, which serve as focal points of local — intra-African — geopolitics with rather "crocodile-like" specifics. As of late, Libya, which is going through the worst kind of civil war, has joined this regret-inspiring list.

All in all, there are hardly any threats to Africa from outside — perhaps, with exception of newfangled trade protectionism of the rich countries, which has become more evident during the course of current global financial and economic crisis.

Of course, in a longer perspective, there is the "threat" of a massive influx of foreign direct investment sooner or later — though perceived as such only by some orthodox leftists. In reality, large-scale foreign investment is a subject of dreams of more than one African leader spending uneasy nights musing over the striking success of China and India and envying their ongoing rapid transformation, facilitated exactly by the energetic capital migration.

The actual and immediate threats are exclusively local in character and are often connected with poor weather conditions, bad demographic situation and a hard historical past — by which we mean not so much the consequences of the colonial rule as the deep-rooted local, tribal and feudal vestige and the overall social and economic backwardness of the young nation-states.

Though such threats are many and usually reinforce each other, the future of the continent looks optimistic enough, and its full-scale integration into the global industrial and market system is only a matter of time.

In the Middle East, highly developed Israeli economy stands out, tightly linked through its long-standing large-scale cooperation with North America and Europe. In particular, its versatile ties with the U.S. are based on a well-developed system of "special relations," which includes a bilateral free-trade arrangement introduced as early as 1985 (first of its type and even preceding FTA with Canada).

In contrast, the Arab countries remain, as a rule, only weakly integrated into the global economy — with an exception of their considerable role in the oil trade and their "petrodollar" holdings in foreign banks around the world.

The historic specificity of this region consists in absolute predominance of geopolitical motivations over geo-economic ones — both in relations between neighboring countries and in the global aspect.

The continuous confrontation of the Arab world with Israel submits a special importance to the regional balance of power and makes the general military-strategic situation in the region unstable and prone to repeated friction.

That is why the world community tries hard to avert the danger that nuclear weapons would one day fall into hands of Iran and its not quite adequate leader, who is so strongly preoccupied with aggressive anti-Israeli and anti-American sentiments.

As for the recent fancy-named revolutions around the Middle East, they are only adding to political and social turmoil, making the goal of establishing normal economic ties among themselves and with the third parties both more acute and more difficult to achieve.

In contrast to North America, which is glued together by the comprehensive NAFTA arrangements, in Central and South America there are probably too many trading blocs which, to boot, are typically weak and ineffective.

Globalization and economic regionalism are surely present there. As for their forms and major driving forces, these are not as definite as one could expect. For about a decade it has been expected that the NAFTA arrangements would be expanded in the Caribbean basin and in Latin America in general, in accordance with the integration doctrine of President George W. Bush's "Enterprise for the Americas Initiative" and with the decisions of several Summits of the Americas.

However, in the end, the bold FTAA (Free Trade Area of the Americas) project has been shelved for an indefinite time. This happened party because two consecutive U.S. presidents did not possess the "trade promotion authority" (TPA) during a seven-year period. And, in part, the integration initiative simply went over to Latin American political leaders whose attention was focused on subregional and local cooperation projects.

Under the circumstances, the U.S. had to switch to the tactic of narrower negotiations concerning trade liberalization with individual groups of countries — with several states of the Caribbean basin, resulting in the controversial CAFTA (Central America Free Trade Agreement), and with a small group of South American states.

As a whole, though, Central and South America may not feel abandoned or neglected. Many countries and their groupings are looking with hope to other continents and regard Europe, Japan and China as welcome and potentially important economic partners.

At the same time, some "gentlemen-comrades" from among state leaders of "leftist" orientation are trying to further stimulate "regional solidarity" and even block-system formation with third countries — to spite "Yankee imperialism."

So far, however, we have not mentioned one-sixth of the global surface that, until recently, was occupied by the giant empire known as the Soviet Union. At the beginning of the last decade of the 20th century, this "Socialist" federal super-state disintegrated into 15 new state entities — from the Russian Federation and Ukraine, to the three Baltic and three Caucasian republics, to a whole set of newfangled nation-states in Central Asia, etc.

However, the real meaning of this sea change and the historic perspective for Russia and its former vassals and current counterparts hardly cannot be grasped easily and demands special analysis.

Russian professor Andrey Borodaevskiy, with half a century of research and teaching experience in the world economy and international economic relations, is co-author of the recent monograph "Russia in the Diversity of Civilizations."


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