Think Tank
Could There Be Multilateralism Across Regional Integration Blocs?

One of the most disconcerting conundrums in international economic relations and the current system of global governance is the absence of a platform that brings together regional integration blocs and their development institutions. This lack of horizontal coordination and communication lines across regional integration arrangements stands in contrast to the prevalence of such coordination at other levels of global governance, whether across countries or between global international institutions, writes Valdai Club Programme Director Yaroslav Lissovolik. Bridging the “regional gap” in global governance has the potential to greatly expand the “possibility set” for new economic alliances and economic openness in the world economy.

The publication of this op-ed marks the beginning of online collaboration between Valdai Club, Russia as part of its Think Tank project and the Center for Russia-China Strategic Interaction under CITIC Foundation for Reform and Development Studies, China. This is the first in a series of planned exchanges between the two organizations on bilateral and global matters. 

Why has multilateralism between regional economic blocs not progressed thus far throughout the global economy? Firstly, regionalism as an intermediate governance layer between global institutions and country-level governance may be perceived as a risk to national sovereignty and a threat to the integrity of multilateral global institutions. The recent cases in point are UK’s Brexit from the EU and the challenges posed by the expansion of the regional trading blocs to global organizations such as the WTO. The latter concerns appear to be off the mark by now, however, given the positive contribution that is delivered by regional integration to opening markets and promoting trade liberalization. Indeed, it may be argued that most of the liberalization impulses across the global economy originate in recent years via regional integration. 
Global Corporations and Politics
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In a world where regionalism is playing an increasingly prominent role, there is still no mechanism for cooperation/coordination among regional integration blocks and their development institutions.
Expert Opinions

Another reason for the lack of connectivity across regional integration blocs may have to do with the high degree of divergence in the level of maturity across regional integration blocs, with the EU standing out throughout decades as a major outlier compared to the rest of the pack. The divergence has been particularly pronounced across the North-South axis, with the developed world exhibiting more structured and deeper levels of integration compared to developing economies. In recent periods, however, this factor has also been transformed as the developing countries have started to catch up to advanced economies in the scale of regional integration. 

More generally, the level of regionalization of the world economy, the depth and the scale of regional integration has grown tremendously in the past several decades. Indeed, at this juncture nearly all continents are covered by a pan-continental regional integration arrangement or a network of regional alliances that account for the bulk of continental geographical space. There is hence a firmer foundation for building a global network of regional alliances, the question is what is the likely evolution of the “integration of integrations” in the coming years if this is indeed to become one of the key pathways to advancing economic liberalization in the coming years.

One possible scenario is the formation of a global network of regional integration blocs through close coordination between global organizations such as the WTO and the G20. Under this scenario a platform that brings together the regional integration blocs where G20 countries play a leading role could be formed – this was the proposal advanced by the Valdai Club for the T20 summit in 2019. Within such a platform for regional arrangements (that may be denoted as R20) the areas of coordination could include a Code of conduct for regional integration arrangements (possibly along the lines of the “Santiago principles” for sovereign wealth funds) that may include such provisions as avoiding politicization and promoting “open regionalism”, modalities of cooperation with the WTO, or procedures for multilateralising trade/investment preferences across the platform.

Another possible scenario is a fragmentation in regional economic alliances, whereby a unified platform or network for regional arrangements remains out of reach. The most likely course of events, however, appears to be further catch-up exhibited by the Global South in building its platforms of regional economic integration. This may with time reach a scale that becomes significant enough to raise the incentives for the advanced economies to explore the possibility of forming a joint global network for regional alliances. This scenario could materialize in case developing countries succeed in forming an extensive enough platform for the regional arrangements that encompasses all of the main regions of the Global South. Such a platform may potentially take the form of a BRICS+ arrangement as outlined in the statements of representatives of Russia and China. 

This brings the discussion on the future evolution of the “integration of integrations” to the following: which platform and which regional arrangement is likely to lead the process of the formation of a global coordination platform for regional integration arrangements? BRICS+ is one possibility in case it evolves into an inclusive system that is open not only to regional blocs from the developing world, but also the advanced economies – the possible platform in this case being BRICS++. 

Another possibility is for the most advanced regional bloc in terms of the depth of economic integration, namely the EU, to spearhead the process of forming a global platform with the support of the G20 and the WTO – in such a scenario the EU’s role may be seen as being indispensable, given its membership and strong linkages with the WTO, the G20 and other international organizations and global networks. In effect the EU could use its special status as a regional integration bloc in international organizations to promote greater connectivity between regional arrangements globally to the benefit of EU’s global role and greater openness in the world economy.

Other potential scenarios may involve the US becoming more active again on the international scene in forming platforms for regional and trans-regional integration: in case the US opts to join the Trans-Pacific Partnership (TPP) and then work to connect this mega-bloc with Transatlantic Trade and Investment Partnership (TTIP), then the resulting platform could potentially become the largest mega-regional bloc in the global economy. Still another possible platform is a “connectivity platform” bringing together development institutions across continents to finance infrastructure projects. China’s BRI if extended to reach beyond Eurasia, could then potentially become the nucleus for a more global network of alliances (a global silk road network) between development institutions.

In the end, for material changes in global governance to take place the key question boils down to leadership – which country and which regional arrangement will be ready to play a leading role in promoting the “integration of integrations” and the advancement of coordination among regional arrangements? At this juncture the EU as the most advanced regional integration arrangement may take on this role, particularly given the significant advances achieved by Europe in building alliances and agreements with other regional blocs. At the same time, the experience of the past several years suggests that China together with its partners from the Global South has exhibited the energy and the commitment to follow the path of building new communication lines in the area of regional integration. Whether the formation of such a global platform originates in the East or in the West, the emergence of a regional layer in global governance is likely to be the defining feature of a revamped international economic architecture in the coming decade.
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Expert Opinions

Views expressed are of individual Members and Contributors, rather than the Club's, unless explicitly stated otherwise.