IPE CPE globalization and regional integration by Y99Z7tP


    - What is it?
             o Friedman (2005), Keohane and Nye (1977, 1998), Held and McGrew (1998, 2000)
    - What is the big debate? Globalization and its effect on national autonomy
             o Garrett (1988)
    - One side: globalization erodes national sovereignty and the ability of governments to effectively
        manage (“race to the bottom”)
             o Ohmae (1993), Sabel (1989), Keohane and Milner (1996), Strange (1996), Rodrik (1997)
    - Another side: globalization does NOT erode national sovereignty and the ability of governments
        to effectively manage
             o Ruggie (1982), Vogel and Kagan (2002), Garrett (1998)
    - Either way, globalization does not follow neoclassical economy theory – it actually helps and
        hurts national economies differently
             o Wallerstein (1974), Williamson (1997), Hall and Soskice (2001), Scott (2001)
    - Globalization can mean many things, but it might be informative to look at one aspect of
        economic globalization more closely: financial globalization
             o Overview
                      Frieden (1991), Cohen (1996)
             o Convergence (cause/effect)
                      Helleiner (1994), Kurzer (1993)
             o Divergence (cause/effect)
                      Sobel (1994), Kapstein (1994)
             o Somewhere in between
                      Goodman (1992)
    - These debates focus so much on national autonomy that we get stuck in a world of international
        institutions or markets v. states. Other actors may also be important, like transnational actors:
             o Risse-Kappen (1996), Finnemore and Sikkink (1998), Keck and Sikkink (1998), Price
                 (1998), Acharya (2004)
    - Clearly, there is an overwhelming literature on globalization, but some question whether this is
        a useful construct. Might regionalization be better?
             o Zysman (1996), Weiss (1998), Hirst and Thompson (2000), Castells (1993)
    - What is regionalism?
             o Mansfield and Milner (1999), Fishlow and Haggard (1992)
    - PTAs -- what are they and what do they do?
             o Viner (1950), Summers (1991), Krugman (1993), Bond and Syropoulos (1996), Bagwell
                 and Staiger (1997)
    - Domestic politics and regionalism (society, institutions)
             o Grossman and Helpman (1995), Eichengreen and Frankel (1995)
    - International politics and regionalism (power/conflict, institutions/strategic interaction)
             o HST, Gilpin (1975), Gowa (1994), regime theory scholars, Haggard (1997)
    - Variations (depth of integration/institutional density, economic/political/cultural heterogeneity)
             o Downs, et al. (1998), Katzenstein (1997)
    - Linking regionalism and globalism (EU, East Asia)
             o East Asia: Pempel (2000), Aggarwal and Koo (2005), Pempel (2010)
             o EU: Garrett (1992), Pierson (1996), Aggarwal and Fogarty (2004)
-   Globalization overview in context of IR theories and history: Nau (2007)
       o Friedman (2005)
                  Three versions of globalization: (1) 1492-1800, age of mercantilism and
                    colonialism which “shrank the world from a size large to a size medium,” with
                    the driving force being power/capabilities, (2) 1800-2000, interrupted by the
                    Great Depression and the World Wars, age of Pax Britannica and Pax Americana
                    which “shrank the world from a size medium to a size small, with the driving
                    force being MNCs or institutions, (3) beginning of 21st century, age of the
                    internet which is “shrinking the world from a size small to a size tiny and
                    flattening the playing field at the same time,” with the driving force being the
                    newfound power of individuals to collaborate and compete globally
                          Version one = realist, version two = liberalist, version three =
       o Realism – power struggles continue to shape globalization and determine the evolution
            of technology, institutions, and ideas; America’s preeminence (especially following the
            rebound from 1970s oil shock and victory in Cold War) opened up the world for
            technology, the internet, open markets, and democracy; version three of globalization is
            different because America now has global predominance (version one = British, version
            two = American, but only in the west); but, hegemony often doesn’t last and we see
            counterforces developing, like terrorists and populist leaders
                  Collapse of Bretton Woods: in 1960s, France challenged US leadership (de Gaulle
                    withdrew France from NATO, launched policy of détente with USSR); US
                    supplied necessary dollars to finance external accounts, but this led to foreign
                    countries holding these dollars; because US couldn’t change the price of gold,
                    the only way it could lower the value of the dollar was for Europe and Japan to
                    raise price of their currencies, but they liked undervaluing because exports were
                    cheaper  national prosperity; trade rules discriminated against US (example:
                    European Common Market – tariffs were zero within it, but excluded US;
                    Common Agricultural Policy reduced imports from US); US lost role as dominant
                    lender to banks based in Europe because MNCs wanted to exploit the zero-
                    tariffs  borrowing from European banks (US couldn’t send dollars because
                    Bretton Woods controlled capital flows)  unregulated Eurodollar market 
                    late 1960s, US switched to aggressive Keynesian policies with large budget
                    deficits, loose money, and domestic wage and price controls  tripled inflation
                     suspended convertibility of dollars into gold  devalued in 1971, 1973 
                    dollar sank  floating exchange rate (before first oil crisis in October 1973)
                  Oil: crises of the 1970s saw balance of oil power shift decisively from the
                    western oil companies (“seven sisters”) to the Organization of Petroleum
                    Exporting Countries (OPEC – originally composed of Saudi Arabia, Kuwait, Iraq,
                    Iran, and Venezuela); inflationary pressures in world economy plus the Arab-
                    Israeli war of October 1973  OPEC officials announced 70% increase in price of
                    crude oil (first time “seven sisters” did not set world price) and embargo, cutting
                    production by five percent each month  higher prices  “stagflation” (slow
                    growth accompanied by high inflation) and volatile exchange rates/capital
                    movements that discouraged trade and foreign investment  ISI in most
                    developing countries (building up domestic industries to substitute for imports)
                     private banks “recycled” the petrodollars which oil exporters deposited with
             them by making loans to oil importing countries (realists say an alliance formed
             with OPEC and developing countries to challenge industrial nations)
                   developing countries organized “Group of 77” to champion cartels
                      and regulation of other world resource markets  proposals for the
                      “New International Economic Order” (NIEO) to set prices and supplies of
                      raw materials other than oil (Commodity Important Program) and
                      provide special and differential treatment for developing countries’
                      manufacturing exports, codes of conduct to expedite the transfer of
                      technology, MNC regulation, and generous programs of aid/subsidized
                      loans to promote development (Generalized System of Preferences)
                   Group of 7 (G-7, 1976) advanced countries created new institutional
                      mechanisms – preserved open trading system, established International
                      Energy Agency (IEA) to coordinate importing country policies toward
                      OPEC and initiated a Conference on International Economic Cooperation
                      (CIEC) with OPEC countries to counter the proposals under NIEO
                  1979 – second oil crisis hits (Iranian Revolution as proximate cause, plus
                      inflation, protectionism, and rapid financial expansion of world markets
                      in 1970s) and disruptions cut oil supplies and caused another price panic
         Rebound came from Reagan and Thatcher policies – rebuilt military defenses
             and strengthened free markets in Cold War struggle; introduced policies to
             reduce inflation, stimulate savings and investment, deregulate labor and capital
             markets, and liberalize trade  once USSR was gone, US clearly dominant
                  Debt crisis of 1980s (North-South relations strained)  IMF increased
                      lending again and banks rescheduled developing country loans, reducing
                      interest rates, increasing the number of years to repay, and promoting
                      structural reforms away from ISI
         Key question: who gains most? Two realist perspectives:
                  Power transitions school – hegemons endure because moves toward
                      balance are dangerous and bring war
                  Balance of power school – expects other states to rise and
                      counterbalance the hegemon
o   Liberalism – technology and institutions drive shifts in power and ideas; third version is
    the “information revolution,” which moved jobs from manufacturing into services, just
    as version one moved jobs from farms to cottage industries and version two moved
    from rural industries to urban factories; trade relations entered a new era with Uruguay
    Round extending free trade rules to cover services, agriculture, investment, and
    intellectual property (GATT  WTO); capital markets liberalized; transnational and non-
    state actors – like independent central banks, MNCs, financial houses – moved money
    around the globe in the flash of an electronic transaction, constrained domestic
    economic policies, and exacerbated trade accounts; NIEO had international institutions
    proliferating and becoming more flexible; dense web of international economic
    interactions put an increasing stranglehold on national sovereignty and made the use of
    military force increasingly less likely (“complex interdependence”)
         Friedman (2005): it is the density, speed, and cost of globalization that are new,
             not the fact; information technologies flattened, furrowed, and fertilized the
                     Flattening made it possible for poor countries as well as rich ones to
                      participate in global production; the flattened earth emphasizes brain
                      power because individuals anywhere with an education can participate
                      in the world economy; information technologies make human resources
                      count more than natural resources, factories, or MNCs
                  Furrowing means tying the world together with broadband fiber-optic
                      cable and satellite transmissions; it magnifies exponentially the capacity
                      to transmit information simultaneously
                  Fertilizing means fostering the emergence of all sorts of new
                      international organizations, particularly transnational or NGOs
          So, technologies like the internet create a new world to which powerful groups
             and conventional ideas must adapt
          Emphasize interactions, path dependence, and spillover – once momentum
             starts down a certain path of interactions, there is no going back to the starting
             point (example: high volumes of trade spilled over into high volumes of finance)
                  Global finance: Bretton Woods was stingy on finance, so US dollar
                      accumulated in unregulated offshore Eurodollar markets in 1960s, first
                      oil crisis popped cork that liberated financial markets because the
                      quadrupling of price in early 1973 (OPEC) wreaked havoc on domestic
                      economies as well as trade  higher prices, slower growth 
                      “stagflation”  instability in exchange rates  explosion of Eurodollar
                      markets  petrodollar recycling  liberalization of financial markets by
                      reducing Bretton Woods’ restrictions on capital flows
                  See multilateral trade (WTO) and regional/bilateral agreements, like
                      NAFTA, APEC, ASEAN, and EC ( EU)
          Complex interdependence – financial crises marred the 1990s (Mexico  Russia
              Asian developing countries  Argentina)
o   Identity – emphasized battle of economic ideas and social reconstruction of
    international norms and values; by the mid-1980s, more conservative free market-
    oriented policies made a comeback with Reagan and Thatcher that reduced government
    spending, lower taxes, sound money and low inflation, deregulated labor and capital
    markets, and freer trade  these ideas ( Washington Consensus – free-market/neo-
    liberal view that embraced anti-inflationary measures, tax and spending cuts,
    privatization, and deregulation – cite Williamson (1990)) created the favorable climate
    that ignited the information revolution and globalization version three, just as laissez-
    faire ideas ignited the second industrial revolution and globalization version two
          Thatcher and Reagan: tax cut and deregulation movement
          G-7 summit in 1983 produced conservative policies  EU deregulated under
             Single Market Act in 1987 and passed Pact on Stability and Growth to keep
             budget deficits within certain limits
          This policy movement toward market-oriented ideas was crucial and received a
             big boost with the collapse of the USSR
                  Showed triumph of Hayekian conservative policies over Keynesian
                      interventionist policies in the 1990s
                   spread of sustainable development ideas at the systemic level
-   Fleshing out some of these overview ideas: Is globalization “complex interdependence”?
        o Keohane and Nye (1977)
                 Complex interdependence is a relationship characterized by costly effects,
                    which may reduce costs, impose costs, or provide benefits, caused by rapid
                    technological change and continued importance of state interests/power
                    (liberalism + realism)
                          States fall on a continuum from realism  complex interdependence
                          Interdependence does not imply cooperation
                 Three characteristics:
                          Multiple channels of contact among society – interstate, trans-
                              governmental, and transnational relations (MNCs)
                          Lack of clear hierarchies of issues – as new actors are incorporated into
                              the system, it is unclear which issues are most important
                          Irrelevance of military force – increasingly costly for major states due to
                              risks of nuclear escalation, resistance by people in poor or weak
                              countries, uncertain and possibly negative effects on the achievement
                              of economic goals, and domestic opinion opposed to the human cost of
                              the use of force
                 Sensitivity and vulnerability – if OPEC decides to produce less oil, thereby raising
                    prices, US consumers will be sensitive to this change because they are
                    dependent on oil; but, in the end, OPEC may also be vulnerable to this decision
                    because the US could develop alternative fuels (“an actor’s liability to suffer
                    costs imposed by external events even after policies have been altered”)
                 Interdependence v. globalization: interdependence can be increasing or
                    decreasing, but globalization implies something is constantly increasing
        o Keohane and Nye (1998)
                 Revisiting “interdependence” in the context of the information revolution: what
                    is new is the virtual erasing of costs of communicating over distance; actual
                    transmission costs have become negligible
                 This has dramatically changed the “multiple channels of contact among society,”
                    but not the other two characteristics
                 Types of information: free, commercial (send at a price), and strategic (confers
                    great advantage on actors only if competitors do not possess it)
                          Altered patterns of complex interdependence by increasing channels,
                              but exists in context of existing political structure  free information
                              flows faster without regulation, strategic will be protected, commercial
                              will depend on property rights
                 Information revolution often thought to have a leveling effect – reduces costs,
                    economies of scale, barriers of entry to markets – but maybe not:
                          Soft power strongly affected by cultural component (example: US
                              dominant in market share of films)
                          Even if cheap to disseminate existing information, production of new
                              information requires costly investments (example: US has capability for
                              collecting intelligence that dwarfs those of other nations)
                          First movers often the creator of standards/architecture of information
                              systems (example: use of English language on the Internet)
                               Off-the-shelf commercial availability of what used to be costly military
                                technologies benefits small states and non-state actors, while increasing
                                the vulnerability of large states (example: terrorism)
                            Issue of credibility: low cost of transmitting data means the ability to
                                transmit it is much less important than it used to be, but the ability to
                                filter information is more so  increasing importance to transnational
                                networks of like-minded experts
                            Democratic advantage: societies familiar with free exchange of
                                information, more transparency
-   This doesn’t really give us a definition of globalization though, so what is it?
        o Held and McGrew (1998, 2000)
                 Globalization denotes the expanding scale, growing magnitude, speeding up,
                     and deepening impact of interregional flows and patterns of social interaction
                 Definitions differ based material, spatio-temporal, and cognitive aspects
                            Material: increasing material flows of people, capital, trade
                            Spatio-temporal: shift in spatial reach of social action and organizations
                                toward the inter-regional/continental scale
                            Cognitive: changing public perceptions of shrinking time and space
                 Contemporary globalization does share much in common with past phases, but
                     it is distinguished by unique spatio-temporal and organizational attributes and
                     its unique challenge to the Westphalian principle of state sovereignty
                 There are multiple types of globalization: economic, political, and military
                 Some scholars are “hyper-globalizers” and others are “skeptics” – both of these
                     positions are too extreme – while regional and global interaction networks are
                     strengthening, they have multiple and variable impacts across different locales
                            Globalization is NOT a homogenizing force – the impact of globalization
                                is mediated by a state’s position in global, political, military, and
                                economic hierarchies, as well as its domestic economy and politics
                            But, there are “overlapping communities of fate” – a state of affairs in
                                which the fortune and prospects of individual political communities are
                                increasingly bound together (growth in trans-border issues like
                                terrorism or financial crises erodes clear-cut distinctions between
                                domestic and foreign affairs)
-   Setting up the big debate: globalization and national policy autonomy/convergence v.
        o Garrett (1998): market integration is thought to affect national policy autonomy
            through three basic mechanisms:
                 Trade competitiveness pressures – big government is by definition
                     uncompetitive; government spending crowds out private investment, is less
                     efficient than market allocations, and cushions market disciplines on prices and
                     wages; in turn, spending must be funded either by borrowing or by higher taxes;
                     taxes cut into firms’ profits and depress entrepreneurial activity; government
                     borrowing increases interest rates; as a result of these effects, output and
                     employment suffer from public sector expansion; since no government can
                     afford these consequences, trade competition must result in a rolling back of
                     the public economy
                    Multinationalization of production – focus on costs to business of interventionist
                     government; firms with production facilities in more than one country can
                     evade these costs by exiting the national economy; governments must thus
                     embrace the free market if they are to compete for the investment and jobs
                     provided by multinational firms
                  Integration of financial markets – traders operating twenty-four hours a day can
                     move mind-boggling amounts of money around the globe more or less
                     instantaneously; governments are held ransom by the markets, the price is high,
                     and punishment for noncompliance is swift
                          Liberalism – core proposition is that liberalization of trade is good for all
                              segments of society
                          “Embedded liberalism” (Ruggie (1982)) – short-run political dynamics of
                              exposure are different; openness can increase social dislocation and
                              inequality and thus increase political pressure to dampen these effects
                              (Bretton Woods did this by combining fixed exchange rates, promoting
                              trade, with capital controls, giving governments autonomy, which
                              turned into welfare provision – “Keynesian welfare state” – in order to
                              support those adversely affected by market risk)
                                  o Distinctive feature: short-run political dynamics of exposure to
                                       trade are very different than long-run (assumption that in long
                                       run, liberalization good for all society)
                  This compromise is no longer viable due to the heightened mobility of
                     productive and financial capital and decline on restrictions on international flow
                     – essentially, the ability of government to deliver on its side of the embedded
                     liberalism compromise has been drastically reduced
                          This view is essentially that a huge leap in exit threats has tilted the
                              balance of power strongly in favor of the market over politics at national
-   What is this argument? Globalization erodes national sovereignty and the ability of governments
    to effectively manage (“race to the bottom”)
        o Ohmae (1993)
                  “Borderless world” – differences between countries matter less
                  Economic activity has become global  less susceptible to state intervention
                  Logic of market competition has caused economic processes to transcend
                     national circumstances (TNCs)
        o Sabel (1989)
                  Globalization has forced the contracting out of production and labor to
                     specialized local networks based on trust and mutual dependence, rather than
                  “Flexible specialization” – increases importance of local networks that can
                     hyper-specialize, which weakens the importance of national governments or
                     entities (example: Silicon Valley)
        o Keohane and Milner (1996)
                  Uses “internationalization” construct — underlying changes in transactions
                     costs that produce observable flows of goods, services, and capital
                  Propositions about internationalization and domestic politics:
                          As internationalization progresses, the tradeables sector will grow
                              relative to non-tradeables, so the economy will become more sensitive
                                to international price signals; external shocks make economy more
                                vulnerable, so should expect major domestic policy reforms
                            But, internationalization will undermine autonomy and efficacy of
                                governmental macroeconomic policy (will be more constraining for left-
                                wing than right-wing governments)
                                     o Sees capital mobility as gaining more political power than labor
                   Domestic institutions can try to resist internationalization:
                            Block relative price signals from international economy from entering
                                domestic economy
                            Freeze coalitions/policies by making costs of changing them very high
         o Strange (1996)
                   Globalization and technological change are diminishing state autonomy because
                      states have trouble controlling the highly mobile assets in the new economy like
                      capital, information, and energy
                   This means that states are losing authority in part to non-state actors like TNCs,
                      but also to impersonal markets (some fundamental responsibilities of the state
                      are not being exercised by anyone – “ungovernance”)
                   Territoriality is neither the sole source of political power and authority nor a
                      critical factor determining the prosperity of a national society; there has been a
                      shift from competition over territory to competition over global markets
         o Rodrik (1997)
                   Argues that globalization is incompatible with domestic stability.
                   Tensions:
                            Among groups: group asymmetries exacerbated by reduced barriers to
                                trade and investment; workers bargaining power erodes
                            Among/within nations: domestic norms/institutions are questioned
                                since the nations are trying to compete for the same thing; different
                                development models make this difficult
                            Within nations: difficult for governments to provide social insurance 
                                “race to the bottom” (declining tax revenues are a result of
                                governments having to lower taxes to retain MNCs within their borders)
                   Need: systemic-level social insurance
                            Governments can no longer maintain welfare state-progressive taxation
                                mix; future of welfare state can only be secured by shifting tax burden
                                from mobile to immobile asset holders (which stunts redistributive
-   Is this argument correct? Another option: globalization does NOT erode national sovereignty and
    the ability of governments to effectively manage (there isn’t a “race to the bottom”)
         o Ruggie (1982) (follows Polanyi’s “double movement” of economic liberalism and social
                   “embedded liberalism” – power is necessary to establish regimes, but the
                      content of the regimes are determined also by social purpose/norms – this
                      fusion “plays a mediating role, by providing a permissive environment for the
                      emergence of specific international economic transactions”
                   After WWII, compromise characterized by multilateralism, predicted upon
                      domestic interventionism
                            The industrial world shared set of social objectives – namely preserving
                             domestic stability (full employment and social stability) – and this
                             combined with US power accounts for the formation of embedded
                             liberal institutions
                                 o These institutions were made at the expense of the third or
                                       non-industrial world
                 After 1971, the US declined, but the normative framework of embedded
                    liberalism remained
                         Examples: shift from fixed to floating rates of exchange; lower tariffs
                             combined with domestic safeguards and negotiated export restraints
                                 o So, national politics and global markets can actually reinforce
                                       one another
        o Vogel and Kagan (2002)
                 “race to the top” (toward stringency)
                 Under certain circumstances, integration can lead to the strengthening of
                    consumer and environmental standards
                         Example: “California effect” of the diffusion of higher regulatory
                             standards and practices
                 Market mechanisms for “trading up”:
                         Firms that want access to aid markets must meet standards of those
                         Once these firms adjust to meet these higher production costs, they
                             lobby for domestic reform or use these as competitive advantage in
                             their home market
                                 o There are thus institutional pressures from international
                                       community and trans-national advocacy groups that can lead to
                                       changes in and diffusion of norms
        o Garrett (1998)
                 Markets may not be completely global, but have “globalized”
                 Globalization constraints on policy choice are not pervasive
                         OECD countries (up to mid-1990s) – industrial countries are NOT
                             similarly integrated into most international markets (pace of
                             globalization varies); fiscal policies (government spending or changes in
                             government spending) have NOT converged; NOT a race to the bottom
                         Market integration is more constraining than trade or
                             multinationalization of production – but still, it has not only increased
                             the exit options of producers and investors, it has also heightened
                             feelings of economic insecurity among broader segments of society,
                             which has given politicians incentives for wealth redistribution
                         Although there are costs for an interventionist government, numerous
                             government programs generate economic benefits attractive to mobile
                             finance and production; this has the effect of reducing inequality, which
                             leads to an increase in social stability, thus stimulating growth
-   An addition to option two: helps/hurts national economies differentially
        o Marx/Lenin: colonial expansion of great European powers in the late 19th and early 20th
            centuries led to exploitation of underdeveloped regions
        o Wallerstein (1974)
           Traces the development of the European world-economy, a global capitalist
            system centered in Western Europe and divided into the core, semi-periphery,
            and periphery; begins in the “long 16th century” and expands to cover the globe;
            the three “zones” are connected by “world market trade” in bulk commodities
         A country’s ability to modernize depends on its role in the world economy;
            whereas the core countries are typically on a trajectory toward democracy and
            increased prosperity (strong states), those in the periphery tend toward
            authoritarian governments and economic stagnation (weak states)
                 The world-economy rewards zones differently – surplus flows
                    disproportionately to the core areas
                         o Once empire proved unsustainable and groundwork laid for
                             modern world-economy, it became inevitable that someone
                             would fill each of the system’s various roles
                         o This is because the world-economy operates as a coherent
                             system; in the global division of labor, the periphery produces
                             lower-ranking goods, for which labor is less well rewarded than
                             for the higher-ranking goods in the core; the goods produced in
                             the periphery tend to be daily-need goods, making the core
                             dependent on periphery for its existence
o   Williamson (1997)
         Effects of globalization across time are the same: a rise in inequality in rich
            countries and a fall in inequality in poor countries
         Mexico and the US: unskilled workers from poor countries emigrate to wealthy
            countries, thus flooding the rich country’s labor market at the bottom
                 US: unskilled wages lowered relative to skilled wages and white collar
                    incomes, thus increasing labor inequality
                 Mexico: unskilled labor, once superfluous and flooding the market, is
                    fleeing, thus decreasing labor inequality
         These inequality trends were in part responsible for rich industrialized countries’
            interwar retreat from globalization
o   Hall and Soskice (2001)
         National differences persist and are even reinforced by globalization
         “varieties of capitalism”
                 Liberal market economies -- solve the problem of production
                    coordination through market or hierarchy solutions
                 Coordinated market economies – solve the problem of production
                    coordination through non-market means
                         o These economies have different institutional comparative
                             advantages, which means firms will locate different types of
                             production in each economy ( international specialization)
o   Scott (2001)
         “Washington Consensus” clearly wrong – free markets do not bring about
            economic convergence, so one-size-fits-all policy doesn’t work
                 Neoclassical theory reminder: poor countries grow faster than rich ones
                    in free global market; capital from rich in search of cheap labor flows to
                    poorer economies and labor migrates from low-income areas toward
                              those with higher wages  labor and capital costs, and eventually
                              income, converge
                          This might work with US and EU – both enjoy labor and capital mobility
                              and free internal trade – but the rest of the world doesn’t fit pattern
                  Income gap between rich and poor has been growing for more than 200 years,
                     but improved global communications have led to an increased awareness
                     among the poor of income inequalities and heightened the pressure to
                     immigrate to richer countries; in response, industrialized nations have erected
                     higher barriers against immigration; this immobility eliminates a potential
                     source of domestic pressure on ineffectual governments, facilitating their
                     survival; this makes the world economy more like a “gated community” than a
                     “global village”
                  Causes:
                          Rich countries insist on barriers to immigration and agricultural imports
                          Poor nations unable to attract much foreign capital due to their own
                              government failings; primary commodities are traditional advantages
                  “one country, two systems”: uses US traditional divide of North/South as a
                     model for understanding developing countries; Italy’s North/South divide (while
                     overall Italian incomes converging toward EU, Mezzogiorno incomes diverging,
                     despite decades of subsides from Rome and the EU  high public-sector
                     employment, patronage, corruption)
                  Point: have to get institutions right and need country-by-country approach
-   Specific types of globalization? Economic – trade globalization
       o Basic theories/models:
                  Mundell-Fleming (“unholy trinity”) – a country cannot simultaneously have (1)
                     fixed exchange rates (price stability), (2) capital mobility (openness to global
                     capital), and (3) autonomous monetary policy (ability to fix domestic interest
                     rates to control inflation); the idea is that, under fixed exchange rates, increases
                     in capital mobility render monetary policy less and less useful as a domestic
                     tool; rather, it simply becomes a tool for maintaining the exchange rate
                  Heckscher-Ohlin Theory (factor proportions) – assumes perfect competition and
                     factor mobility within trading countries, but immobility between countries;
                     equal demand conditions, zero transport costs, constant returns to scale, fixed
                     technology, and that every product can be unambiguously defined in terms of
                     factor intensity; given these conditions, trade patterns are determined by the
                     fact that countries have different relative factor inputs; each country will export
                     those products that require a great deal of its relatively abundant factor of
                     production, and import those that require inputs scarce in that country
                  Stolper-Samuelson Theorem -- in a two factor world with complete mobility of
                     factors within a country, trade liberalization will lower the real income of one
                     factor of production (the scarce factor) and increase the real income of the
                     other (the abundant factor); under demanding assumptions, wage rates and
                     returns to capital will each equalize across trading countries (known as “factor
                     price equalization”)
                  Ricardo-Viner Model – factors of production are industry-specific even in the
                     long run, so trade liberalization will benefit all factors in the export industry but
                     hurt all factors in the import-competing industry
                    “Specific-factors approach” – economy is organized into sectors to which factors
                     are specific, along with factors that can move freely from activity to activity; the
                     result is that changes in the prices of goods have their principal effects on the
                     specific factors, with collateral (ambiguous) effects on the mobile factors
-   Specific types of globalization? Economic – financial globalization/internationalization
       o Frieden (1991)
                  Framework for analyzing international capital mobility – this mobility is often
                     seen as a fundamental change in the international economy
                  There is greater international mobility of financial assets (capital), more modest
                     international mobility of other assets (equity, for example, is more
                     geographically specific), and markets for firm- and sector-specific capital are
                     quite nationally segmented, showing the continued importance of unexpected
                     exchange rate movements
                  Financial capital mobility has little effect on most sector-specific policies, but
                     integration of financial markets has significant effects on the effectiveness and
                     differential distributional impact of national macro-economic policies
                           World has changed from one in which national macroeconomic policy
                              operated primarily via interest rates to one in which policy operates
                              primarily via exchange rates
                  “Specific-factors approach”
                           Over the long run, international financial integration tends to favor
                              capital over labor, especially in developed countries; in the shorter run,
                              which is more relevant to politics and policies, the issue is more
                              complex: in the developed world, financial integration favors capitalists
                              with mobile or diversified assets and disfavors those with assets tied to
                              specific locations and activities such as manufacturing or farming.
                           Useful for analysis of international finance:
                                  o Emphasizes political relevance of short-term fluctuations in the
                                       returns to different sorts of economic activity
                                  o Assumes most people and investments are “caught” (or stuck,
                                       meaning without high job mobility) in their current activity to
                                       one degree or another
                                  o Some factors may be mobile (unskilled labor), while others are
                                       specific (skilled labor)
                  Note: sectoral approach as contrasted to class (Marx); here there is competition
                     among various sectors of the economy, not competition among classes
       o Cohen (1996)
                  Financial globalization started in the late 1950s when private lending and
                     investment again gathered momentum
                  Possible explanations:
                           Realist model: Determining role of policy rivalry among governments in
                              an insecure world, each calculating how best to use its influence and
                              capabilities to promote state interest
                                  o Critique: reversibility appears to be logical corollary – does this
                                       make sense? Which “face” (James and Lake 1989) of hegemony
                                       is at work here?
                           Liberal model: Powerful impacts of competition and innovation in
                              financial marketplace; advances in communication/information
                     technologies  decreased barriers to market integration/free flow of
                     capital (neoclassical economics)
                         o Critique: approach often links globalization outcome with its
                              defining characteristics  tautology
                  Pluralist model: Role of domestic politics and institutions in driving
                     international developments
                  Cognitive model: Role of belief systems and epistemic communities as
                     catalysts for change
          Consequences of globalization
                  Macro-level – implications for aggregate economic performance and
                     effectiveness of national stabilization policies
                         o “unholy trinity” (Mundell-Fleming)
                         o Financial globalization places a constraint on sovereign states
                  Micro-level – implications for domestic distribution and the role of
                     public policy in structuring private activity
                         o Financial globalization enhances the leverage of investor
                              interests by reducing barriers to exit
o   States are assumed to have a key role in financial globalization, but scholars posit
    different policy explanations and causes – autonomy debate within one aspect of
    economic globalization:
          Convergence/lack of autonomy
          Helleiner (1994): at the systemic level, "competitive deregulation" by
            governments maneuvering unilaterally to attract the business of mobile
            financial traders was reinforced as early as the 1960s by policy initiatives from
            the two leading financial powers of the day, the United States and Britain, both
            with a strong interest in promoting a more open international order; at the
            cognitive level, an ideological shift from postwar Keynesianism to a neoclassical
            or neoliberal policy framework gained strength from the preexistence of a
            sophisticated epistemic community of central bankers based around the Bank
            for International Settlements
          Divergence/autonomy
          Sobel (1994): process is best explained by purely domestic considerations--
            competition between organized interests within national political economies
            has spilled over to affect the international environment; focusing specifically on
            recent developments in the securities markets of Britain, Japan, and the United
            States, rejects structural or ideational interpretations of globalization, which he
            labels "outside-in" explanations: "In these explanations, the primary stimulus
            motivating change arises outside the domestic political economy, but compels
            changes that impact the domestic political economy"; prefers instead an
            alternative "inside-out" explanation, which he defends with extensive evidence
            of persistent national distinctions and "home bias" in bond and equity markets;
            this incomplete convergence shows the importance of domestic policy
o   Financial globalization has put governments on the defensive, but scholars posit
    different consequences of this defensive view – autonomy debate again:
          Convergence/lack of autonomy
          Kurzer (1993): sees rather little scope for effective state responses to global
            finance; comparative study examines the fate in the 1980s of tripartite
            distributive arrangements between business, labor, and government in four
                    small European democracies: Austria, Belgium, the Netherlands, and Sweden; in
                    all four countries, traditional policies of "social concertation" have recently been
                    abandoned. The timing of these changes varied across the countries, which may
                    be explained by differences in such factors as business preferences,
                    administrative rulings, and the historical stance of foreign economic policies, but
                    the overall outcome ultimately was the same and may be attributed to financial
                    globalization: "As business and finance became more mobile, their power
                    resources increased, and those of labor decreased. . . . [T]he greater mobility of
                    capital and deepening financial integration corroded social concertation";
                    "governments have lost the ability to carve out national economic strategies
                    and to sustain social accords"
                 Divergence/autonomy
                 Kapstein (1994): surveys regulatory responses to the internationalization of
                    commercial banking over the postwar period (prudential and supervisory
                    agreements negotiated by major central banks); identifies the formula
                    "international cooperation based on home country control," which has enabled
                    governments to mount an effective response to the challenges of financial
                    globalization; though imperfections remain, a workable framework for
                    governing global financial markets has been created and may suggest a "generic
                    policy solution" to the conflicting demands of systemic and societal forces in
                    other issue-areas as well: "International cooperation based on home country
                    control provides a way for states to enjoy the benefits of interdependence while
                    maintaining national responsibility for the sector in question"
                 Somewhere in between
                 Goodman (1992): comparative analysis of central banking practices in three big
                    West European economies: France, Germany, and Italy; primary concern is with
                    the role played by institutional differences, particularly differences in the degree
                    of central-bank independence that "govern the extent to which domestic
                    political pressures influence national monetary policy"; assumes context of
                    deepening financial interdependence; the globalization of finance drives states
                    voluntarily to limit their own monetary autonomy by means of cooperation (in
                    Europe, up to and including the possible creation of a full monetary union);
                    authority may be lost at the national level but might be regained through a
                    convergence of policies at a higher level
-   What about non-market, non-state actors as facilitators of globalization? Transnational actors
    (TNAs) – do they impinge on state authority and how?
       o [Notes on these in constructivism outline]
                 Risse-Kappen (1996) – NATO emergence, liberal states form pacific federations
                 Finnemore and Sikkink (1998) – “life cycle of norms”
                 Keck and Sikkink (1998) – transnational advocacy networks, human
                    rights/environment, Brazil/Malaysia
                 Price (1998) – TNAs and land mines
                 Acharya (2004) – norm localization in Asian regionalism
-   Is it even useful to think about globalization? Is regionalization a better concept?
          o Zysman (1996)
                  “global economy is a myth” – process of regionalization, not globalization
          o Weiss (1998)
                  More appropriate label for the phenomenon is “inter-nation-alization”
          o Hirst and Thompson (2000)
                  Genuinely transnational companies rare – most are nationally based and trade
                      multinationally, but there seems to be no major tendency toward the growth of
                      truly international companies
                  FDI highly concentrated among AICs and Third World remains marginal in both
                      investment and trade (minus a few NICs)
                  World economy is not global – trade, investment, and financial flows
                      concentrated in Triad of Europe, Japan, and North America
                  These major powers have the capacity, especially if they coordinate policy, to
                      exert governance pressures over financial markets
                            So, global markets are NOT beyond regulation and control – we haven’t
                               seen true globalization
          o Castells (1993)
                  There is a new division of labor in the global economy stemming from the
                      information-based production characterized by interdependence,
                      regionalization, increasing diversification within regions, selective inclusiveness,
                      exclusionary segmentation
                  But there are limits to the globalization thesis:
                            The global economy is actually organized around three regions: North
                               America, European Union, and Asia-Pacific; around this “triangle of
                               wealth, power, and technology,” the rest of the world is organized
                               hierarchically and asymmetrically, in an interdependent web
                                   o Regionalization is thus an attribute of the global economy
          o Mansfield and Milner (1999)
                  Four waves of regionalism
                            Progressive bilateralism – starting second half of 19th century, Europe –
                               intra-European trade rose dramatically; functioned as a single market by
                               20th century – customs union in various states (1850s/1860s); first
                               decade 20th century, UK had bilateral arrangements with 46 states
                            Highly preferential arrangements – soon after WWI ended, second wave
                               with highly preferential regional arrangements, discriminatory,
                               protectionist, “beggar-thy-neighbor” policies, typically among sovereign
                               states; examples: Hungary, Romania, Yugoslavia, and Bulgaria each
                               negotiated tariff preferences on their agricultural trade with various
                               European countries, US with Latin American countries
                            Regional concentration waves – regional concentration of trade flows
                               generally has increased since the end of WWII (due much to EC); has
                               particularly increased among members of a PTA (not merely in same
                               geographic region), but in two waves:
                                   o 1950s-1970s (wave one): establishment of EEC, EFTA, CMEA,
                                        regional trade blocs among developing countries (backdrop of
                                        Cold War)
                o     1990s (wave two): post-Cold War, US actively promoting and
                      participating in process, high levels of economic
                      interdependence, willingness by major players to mediate trade
                      disputes, and multilateral framework (GATT/WTO)
   Definition of regionalism:
          Region often defined as a group of countries located in the same
             geographically specified area and/or sharing cultural, economic,
             linguistic, or political ties
                 o Problems: is Asia-Pacific one region or two? How big is the
                      European region?
          Fishlow and Haggard (1992): regionalization v. regionalism
                 o Regionalization – economic process whereby economic flows
                      grow more rapidly among a given group of states in the same
                      region than between these states and those located elsewhere
                 o Regionalism – political process characterized by economic policy
                      cooperation and coordination among countries (so commercial
                      regionalism driven largely by spread of preferential trading
                      arrangements (PTAs))
   PTAs
          Liberalize commerce among members while discriminating against third
          Viner (1950): trade-creating v. trade-diverting
                 o Trade-creating – one member of customs union newly imports
                      from another something that it formerly did not import at all
                      (high-cost  low-cost)
                 o Trade-diverting – one member of customs union newly imports
                      from another something it formerly imported from third
                      country, because that was the cheapest possible source (low-
                      cost  high-cost)
                            A custom union’s static welfare effects on members and
                               the world as a whole depends on whether it creates
                               more trade than it diverts (though effects debatable)
   Regional trade agreements can influence welfare of members by allowing firms
    to realize economies of scale, but static welfare implications uncertain
   Regional economic arrangements might bolster multilateral openness
          Can induce members to undertake/consolidate economic reforms
          Summers (1991), Krugman (1993): regional institutions reduce the
             number of actors engaged in multilateral negotiations, thereby muting
             problems of bargaining and collective action
   Then again, it might not
          Bond and Syropoulos (1996): formation of customs unions may render
             multilateral trade liberalization more difficult by undercutting
             multilateral enforcement
   Or, it can be qualified
          Bagwell and Staiger (1997): when the multilateral system is working
             poorly, preferential agreements can have their most desirable effects
             on the multilateral system
   Domestic politics and regionalism
         Societal factors
                o Grossman and Helpman (1995): whether a country chooses to
                    enter a regional trade agreement is determined by how much
                    influence different interest groups exert and how much the
                    government is concerned about voters’ welfare; political
                    viability of PTA often depends on the amount of discrimination
                    it yields; agreements that divert trade will benefit certain
                    interest groups while creating costs borne by the populace at
                    large; if these groups have more political clout than other
                    segments of society, then a PTA that is trade diverting stands a
                    better chance of being established than one that is trade
                    creating; by excluding some sectors from a PTA, governments
                    can increase domestic support for it, thus helping to explain
                    why many PTAs do not cover politically sensitive industries
                    (example: EEC’s exclusion of agriculture)
         Domestic institutions
                o PTAs can be commitment devices
                          Eichengreen and Frankel (1995): PTAs can be made by
                              policymakers who prefer liberalized trade, but face
                              domestic obstacles; Columbia and Venezuela (1991)
                              turned the previously dead Andean Pact into a
                              successful FTA; this was a politically easy way to
                              dismantle protectionist barriers to an extent that their
                              domestic legislatures would never have allowed had the
                              policy not be pursued in a regional context
                                   Other example: if governments expect domestic
                                      opposition to liberal economic reforms, can
                                      enter a PTA to bind themselves to these
                                      changes (Mexico entering NAFTA)
   International politics and regionalism – power and conflict
         Hegemonic stability theory (Kindleberger 1973, Gilpin 1975, Krasner
            1976) – discriminatory trade arrangements are outgrowths of the
            economic instability fostered by the lack or decline of a hegemon (which
            can provide economic stability); current wave of regionalism triggered
            or accelerated by US decision to pursue regional arrangement in early
            1980s when its economic power waned and multilateral trade
            negotiations stalled; erosion of US hegemony over past 50 years has
            stimulated rise in number of PTAs and states entering them
                o Gilpin (1975): benevolent and malign strains of regionalism; on
                    the one hand, regionalism can promote international economic
                    stability, multilateral liberalization, and peace; on the other, it
                    can have a mercantilist tenor, degrading economic welfare, and
                    fostering interstate conflict
                          Since WWII, regionalism has been relatively benign
                o Gowa (1994): “security externalities” imply that since PTAs
                    liberalize trade among members, arrangements are especially
                    likely to form among allies (bolsters political-military capacity)
                            Regime theory (Keohane 1984, Snidal 1985) – global openness can be
                             maintained in the face of declining or absence of hegemony if a small
                             group of leading countries collaborates to support the trading system;
                             erosion of US hegemony may have stimulated creation/expansion of
                             PTAs because leading economic powers felt these arrangements would
                             help them manage international economy
                 International politics and regionalism – institutions and strategic interaction
                          Most contemporary PTAs established under auspices of the GATT/WTO,
                             which has attempted to dampen trade diversion by limiting members’
                             ability to discriminate against third parties; limited success because
                             many arrangements by less-developed members have been highly
                          GATT attempts to regulate formation of PTAs
                                  o Article XXIV of the GATT: PTAs must eliminate internal trade
                                      barriers and must not increase the average level of members’
                                      external tariffs (but can have trade diversion)
                          GATT made efforts to manage strategic interdependence among PTAs
                                  o Preferential agreements have formed in reaction to one
                                      another (EFTA in response to EEC), but not to obtain MFN
                                      treatment or as the product of mercantilist policies
                                            Why? rival blocs want to bolster competitiveness and
                                               give more bargaining power than constituent members
                                            Haggard (1997): CEFTA hoped formation would bolster
                                               ability to negotiate entrance into EC/EU
                 Variations among regional institutions
                          Downs, et al. (1998): depth of integration varies; deeper integration
                             more easily attained if states share interest in economic liberalization
                             and easier with fewer states due to collective action problems; more
                             effective to create smaller PTA composed of states with preference for
                             liberalizing economic relations and then take on additional members
                             incrementally, just as the EC/EU did
                          Katzenstein (1997): economic, political, cultural heterogeneity varies;
                             Asia’s commitment to “open regionalism,” implying a desire for non-
                             discriminatory trade practices and a willingness to accept new
-   Empirical examples: East Asia and EU
-   These studies relate to the importance of the presence of a hegemon/East Asian regionalism.
       o Pempel (2000)
                 Most national economies of Asia have become increasingly tied together
                    through economic integration involving primarily FDI, trade, bank loans, and
                    other capital movements, but regional closeness was only partially paralleled by
                    closer political integration
                 Two stages of growing economic integration in Asia:
                          First three decades following WWII: trade and aid; bilateral linkages
                             between US and/or Japan and other economies; this was tied to military
                             strategic alliances (not economic) and government-led
                                 o    Didn’t enhance intra-Asian trade (“regionalism” only in the
                                      sense that a number of countries had similar bilateral economic
                                      links to Japan and the US)
                                 o Little institutionalization (though ASEAN formed in 1967)
                          Following breakdown of Bretton Woods in 1971: FDI, portfolio
                             purchases, and bank loans; multilateral (including South Korea, Taiwan,
                             Hong Kong, and China)
                                 o Japanese capital initially became most important – yen
                                      appreciated, costs of land/labor elsewhere fell  outflow of
                                      Japanese capital ( investment expansion + financial
                                      institutions’ expansion)
                 There has been some slight increase in institutionalization (non-official
                    institutions like PECC, for example), but any Asian economic success has relied
                    heavily on exports to markets of North America – highly dependent on a
                    regionalism that is open
-   Can we link globalization/regionalization at an even lower level? Sub-multilateral level
       o Aggarwal and Koo (2005)
                 East Asian international economic integration: many countries, including Japan,
                    China, South Korea, ASEAN members, and Taiwan are in WTO (formerly GATT)
                 East Asian regional economic integration: lacks significant formal
                    institutionalization (even ASEAN avoids commitment to the elimination of tariffs
                    and other trade barriers), but impressive in a practical sense – there is soaring
                    intra-regional trade and investment flows
                          It is just an informal, network-style integration instead
                 Because this has come under stress, though, a growing number of East Asian
                    countries have begun the pursuit of greater institutionalization at the sub-
                    multilateral level, actively weaving a web of preferential arrangements with
                    countries both within and outside the region
                          Examples: Japan-Singapore Economic Partnership Agreement (2002),
                             China signed framework free trade agreement with neighbors in
                             Southeast Asia (2003)
                 Use institutional-bargaining game approach – there are many types of trade
                    governance measures: unilateral, bilateral, minilateral, multilateral
                 Following the crisis in the late 1990s, one option was to secure preferential
                    access and create a more diversified export market; tighter institutionalization
                    (wanted to pursue club goods, not public goods) – rather than loosely-
                    structured production markets – might be a better commitment mechanism for
                    providing economic security  PTAs
                          Many wanted China as FTA partner; crisis changed domestic pressures
                             (challenges to regime legitimacy/political turnover); many East Asian
                             trade experts are now part of an “epistemic community” which shares
                             the view that preferential arrangements can be trade-enhancing and
                             serve a similar purpose as multilateral trade liberalization; growing need
                             for an “insurance policy” to realize free trade sub-multilaterally when
                             multilateral trade liberalization is stalled or proceeding slowly (and this
                             often goes beyond trade in goods to include things like services and
                           Note: some arrangements potentially incompatible with WTO because
                            they deliberately exclude some sensitive sectors
        o   Pempel (2010)
                  Since turn of century, substantial increase in formal linkages among East Asian
                          Not neo-realist prediction of anarchy following end of Cold War
                          Not neo-liberal idea that institutions automatically reduce national
                             competition in favor of coordination
                          Not constructivist idea that there is a march toward a shared vision of
                             East Asian community
                  The large number of new institutional ties reflects a sequence of disjointed East
                    Asian efforts to deal with discrete changes in the global and regional balance of
                    power (especially as response to financial crisis in late 1990s); institutional
                    responses typically ad hoc, often contradictory, but largely pragmatic;
                    collectively, created a set of regional institutions that allow East Asian states to
                    deal with commonly perceived threats, but many are distinctive and states
                    identify interests/challenges differently; regional bodies reflect the
                    preeminence and driving force of individual state strategies rather than any
                    collective predisposition toward regionalism/multilateralism
                  Common “enemy” against which economic institutions are directed is
                    exogenous force of global capitalism
                          Offered soft balancing against worst excesses of unmediated
                             globalization even as individual governments took steps to self-insure by
                             accumulating large war chests of currency reserves
                                  o ASEAN+3 (APT, extra three are South Korea, Japan, China) –
                                      began in mid-1995; in 2000, initiated Chiang Mai Initiative,
                                      expanded currency swaps, initiated regional surveillance
                                      mechanism; idea to reduce Asian dependence on US dollar for
                                      financial reserves, currency baskets, international transactions
                                      (example: through regional bond markets)
                                           Regional, but not anti-global; no longer pan-Pacific (no
                                              US influence), focused on finance, not trade
                  Security bodies directed at regionally endogenous security problems of a much
                    more particularistic character (no common enemy; example: Six Party Talks – no
                    comprehensive membership, directed against intraregional not exogenous
                    threats, and particularistic in the security problem – DPRK’s nuclear activities)
-   EU – the following two studies of member-state constraints in the EU link nicely to the debate
    about globalization effects – they suggest that member-states have to give up some of their
    national autonomy in these regional agreements
        o Garrett (1992)
                  By focusing on the functional aspects of the evolution of cooperation and
                    arguing that arrangements are generated to solve common problems, analysts
                    downplay the distributional conflicts between states and the impact of power
                    asymmetries in conflict resolution
                  EC shared common goal of increasing competitiveness of European goods and
                    services in global markets, but substantial differences in national preferences
                    (Thatcher wanted laissez-faire trade regime, France and Germany were similar
                    in that they wanted mutual recognition of standards/products but not sweeping
            deregulation of national political economic regimes within Europe, poorer
            Southern Europe wanted more interventionist market with developmental
         Institutions supporting internal market are not just apolitical providers of
            information – while national vetoes obtain in most international regimes, a
            qualified majority (QMV) of states in the Council of Ministers may impose its will
            on other members of the EC (this decision favored France/Germany initially)
                 Commission has agenda-setting power; EP has ability to veto directives
                     that as many as all but one of the council members approve because it’s
                     done unanimously or ability to amend
                 So, Commission and Parliament should be able to pass internal market
                     directives that accord closely with its own preferences (though not
                     much evidence it has done this)
         EC law considered to have supremacy over national laws and to have “direct
            effect” in domestic jurisdictions
                 Chose political and economic institutions to govern internal market (not
                     national states)
                 EC laws have effectively constrained the behavior of members even in
                     areas that impinge directly on the traditional authority of national
o   Pierson (1996)
         IR, “intergovernmentalist perspective” of European integration – centrality of
            member-state sovereignty; instrumentality of institutions (reduce transaction
            costs); centrality of intergovernmental bargains
                 Ordinary diplomacy under conditions creating unusual opportunities for
                     providing collective goods through highly institutionalized exchange
                     (forum for interstate bargaining)
                 But, focus only on Single European Act and Maastricht Treaty, ignoring
                     smaller bargains
         IR, “neofunctionalist perspective”– spillover processes and the autonomous
            actions of supranational actors like the Commission contribute to European
            policy making (example: Commission and EP set agenda)
                 But, this attributes greater autonomy to supranational actors than they
                     actually have and fails to account for why member-state threats are not
                     always credible
         Comparative, see EC as a quasi-federal, multilevel, or multi-tiered political
            system, but this view tends to describe the system rather than explain it
         Comparative, better alternative: historical institutionalism
                 Temporal gaps argument: Long-term institutional consequences are
                     often the by-products of actions taken for short-term reasons (policy-
                     makers have high discount rates; focus on short-term outcomes)
                 Unintended consequences likely to be widespread, especially because
                     of high issue density in the EU  problem of (1) overload, which gives
                     time constraints, scarcities of information, and the need to delegate
                     decisions to experts, which in turn leads to gaps in member-state
                     control; problem of (2) spillover – tendency of tasks adopted to have
                     importance consequences for realms outside those originally intended
                            Member-state preferences shift over time (because national
                             governments come and go), but the EC focuses on core concerns of
                             traditional domestic politics  gaps in member-state control
                  IR response: competition and learning over time will fix these gaps, but the
                     question is, once gaps appear and are identified, how easy is it for the principals
                     (member-states) to gain control? Not easy – member-states are constrained!
                          Resistance of EC institutional actors
                          Institutional obstacles to reform within the EC (example: a Treaty
                             revision requires unanimous member-state agreement, plus ratification
                             by national parliaments and (in some cases) electorates)
                          Sunk costs associated with previous actions (locked in to acquis
                  Examples: gender equality  extensive national reforms of social security law
                     and corporate employment practices; workplace health and safety  higher
                     standards than any member-state had on its own
-   This links regionalism and globalism – EU trans-regional and inter-regional trading
        o Aggarwal and Fogarty (2004)
                  “regionalism” typically seen as geographically-concentrated minilateral accords
                  “interregionalism” – pursuit of formalized intergovernmental relations with
                     respect to commercial relationships across distinct regions
                          Types: pure (links two free trade areas or customs unions, EU-
                             Mercosur), hybrid (customs union negotiates with group of countries
                             from another region, but not part of customs union or FTA – Lome
                             Agreement), trans-regionalism (two regions where neither is a grouping
                             – APEC)
                                  o These arrangements can be treated as international regimes
                                  o Look at strength, nature (liberal/protectionist, issue scope,
                                     development emphasis), and EU’s commercial treatment of the
                                     counterpart region (uniform or different rules for different
                  What affects EU trade strategies? Possibilities:
                          Interest groups (relative influence)
                          Bureaucracies (European institutions like the Commission, EP, Council
                             try to maximize their own influence)
                          International systemic constraints and opportunities (constraints can be
                             from a need to respond to external threats, namely US hegemony, or
                             need to nest within broader institutions, the broader economic system
                             and then the even broader security system)
                          Need to forge a common European identity and interests (and by
                             formalizing transactions between Europe as a whole and other
                             recognizable regions would serve this purpose)
                  Some examples (not including EU-North America, since these are mainly
                  EU-Africa, the Caribbean, and the Pacific (1975)
                          Lome Convention – govern commercial relations between European
                             countries and many former colonies; strongly institutionalized European
                              support for and preferential treatment of these countries’ industries
                              and exports
                                   o Attempt at institutionalized interregionalism (Lome provisions
                                        were “contractual” in nature)
                  EU-CEE (1990)
                          Dynamics of regionalism and interregionalism most intertwined;
                              initially, interregional – poor, fragile new democracies could not be
                              immediately brought into the Union, but EU members encouraged CEE
                              to pursue own sub-regional groupings to promote stability (minus the
                              Balkans): Visegrad group (Poland, Czechoslovakia, Hungary), Baltic trio
                              (Lithuania, Latvia, Estonia), and Commonwealth of Independent States
                              (former Soviet republics, CIS)
                                   o Initial interregionalism  bilateralism in Visegrad and Baltic
                                        trio; for CIS, futures were less directed toward gaining EU
                                        membership, so maintained a stronger tendency toward
                  EU-Southern Mediterranean (1995)
                          Barcelona Declaration – established 2010 as goal for establishing a free-
                              trade area with the Med12 countries (mainly MENA); objectives were to
                              accelerate sustainable socioeconomic development, improve living
                              conditions, and encourage regional cooperation/integration (with
                              increased financial assistance)
                                   o EuroMed Group – EU’s treatment has been mostly nonuniform
                                        (EU members/hopefuls = Malta, Cyprus, and Turkey have
                                        followed Copenhagen Criteria, but not others)
                                              Weakest interregional regime of these cases
                  EU-South America (1995)
                          EU-Mercosur Interregional Framework Cooperation Agreement –
                              interregional free trade area was primary goal, but fairly weakly
                                   o Pure-interregionalism
                  EU-East Asia (1996)
                          Asia-Europe Meeting (ASEM) – ASEAN + Japan, China, South Korea
                              (APT); broad agenda to pursue plural approach to relations (from
                              business to development to cultural exchanges)
                                   o Hybrid-interregionalism
                  Overall: trade within these regions has grown relative to their overall trade with
                     the rest of the world
-   [Other potentially useful literature to incorporate that is in other outlines (depending on
    question): further dependency theory, development (Gerschenkron, Gourevitch)]

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