In awarding the 2012 Nobel Peace Prize to the European Union, the Swedish Royal academy recognized 60 years of achievements in European economic integration. It all started in 1951 with the European Coal and Steel Community, an agreement whose purpose was to increase economic integration in two important economic sectors but whose real aim was to build peace through common interests in vital geostrategic areas.
The EU example shows that there is much more than just the elimination of trade barriers in regional integration efforts. Throughout the world regional economic integration is often pursued in tandem with cooperation in other policy areas such as security. This is not just about mission-creep, an accusation often launched against European institutions.
· Trade builds trust. Regional economic agreements facilitate economic cooperation and dialogue (so does the World Trade Organization). They can serve as a space for mutually beneficial institutional arrangements, relying on “soft law” types of arrangement, where best endeavors, consultations and dialogue, and progressive convergence lead to actual changes and create a path for reform.
· Regional agreements and institutions promote regional public goods, public goods that nation states cannot produce alone, such as coordinating policies towards mutually beneficial outcomes, establishing common regulatory agencies, or enabling joint infrastructure projects. Think for instance of the European Internal Market and the free movement of goods, services, people, and capital. Think of the European Competition enforcement regime and the carbon emission trading market. Think of the Single European Sky.
· Globalization means increased economic interdependence and thus the need for joint economic governance. Obviously the Nobel Prize comes at a sensitive time for the European Union. The Euro crisis is showing that the European Union is not perfect, but also demonstrates that coordinated economic responses and solidarity are the only way forward and that the crisis should not overshadow the enormous achievements of European Cooperation, not least peace and stability.
Regional trade liberalization efforts have long been criticized by economists as creating discriminatory and preferential market access regimes, and infusing undesirable complexity into the trading system. While this criticism is fair in some cases, it fails to account for the potential of regional integration to trigger further liberalization, and ignores the benefits of regional cooperation in many economic and non-economic areas.
Developing countries have understood the potential benefits of increased regional cooperation. Yet it remains a challenging undertaking that requires the highest level of leadership. Moreover, while broad lessons have been learned from European and other efforts, no one size fits all. Countries should pursue integration strategically, focusing on what is achievable and one the areas where gains will be the most important. Even the European Union started small. Agreements bloated by too many issues may lose significance and fail to achieve much.