Policy Frameworks Enabling or Restricting Globalization
- Imagine a world where goods, services, and people move seamlessly across borders.
- Now, contrast this with a world where barriers slow or even stop these flows.
Policy frameworks - the rules and agreements set by governments and organizations - determine which of these worlds we live in.
Multi-Governmental Organizations (MGOs)
- Regional MGOs are established by national governments to regulate cooperation between countries.
Different Levels of Economic and Political Integration
- Rather loose political cooperation allowing for discussing and coordinating policies, e.g. African Union.
- Free Trade Area (or Trading Bloc): member states have no internal tariffs on trade, but can keep separate trade policies to third-party countries, e.g. NAFTA/USMCA.
- Customs Union: the same as Trading Bloc enhanced by common external trade policy, e.g. MERCOSUR.
- Common Market: the same as Customs Union enriched with freedom of movement of the factors of production, e.g. European Economic Area: the EU + Norway, Iceland, and Liechtenstein.
- Economic and Monetary Union: the same as Common Market, but with a common currency, e.g. the Euro zone within the EU.
- Economic and Political Union: deeper integration that goes beyond economic relations, e.g. the EU.
The European Union (EU): A Single Market and Beyond
- The EU is a unique example of economic and political integration.
- It operates as a single market, allowing goods, services, capital, and people to move freely among its 27 member states.
- The EU's single market is a comprehensive free trade area that goes beyond abolishing tariffs to include the free movement of people and capital.
Analogy
Think of the EU single market as a “no-borders” zone for trade and life, similar to how you can travel between states in the US without encountering checkpoints.
Key Features of the EU
- Common Political Institutions: the European Parliament coming from free elections, the European Commission playing a role of quasi-government, the European Council bringing together prime ministers and heads of states to make strategic decisions.
- Common Symbols: the flag and anthem.
- Free Trade: No tariffs or quotas on goods traded within the EU.
- Common Policies: Shared regulations on agriculture, environment (including climate) competition, and consumer protection.
- Free Movement of People: Citizens can live, educate and work in any member state.
How It Enables Globalization
- By removing internal barriers, the single market creates a large, unified economy that attracts investment and fosters innovation.
Hint
The EU also negotiates trade agreements as a bloc, giving it more leverage in global trade discussions.
Challenges and Restrictions
- The EU's common external tariff imposes duties on goods from non-member countries, which can restrict trade with the rest of the world.
- Policies like the General Data Protection Regulation (GDPR) can create barriers for non-EU companies operating in Europe.
Common Mistake
- Many students assume the EU is solely an economic union. Remember, it also has political dimensions, such as common institutions or a shared foreign policy.
- Many students confuse the European Council which is the EU institution with the Council of Europe - an organization founded in 1949 promoting human rights, democracy, and the rule of law in Europe.
ASEAN: Regional Cooperation in Southeast Asia
- The Association of Southeast Asian Nations (ASEAN) focuses on economic growth, cultural exchange, and regional stability.
- There are 10 member states in ASEAN.
Key Features of ASEAN
- ASEAN Free Trade Area (AFTA): Reduces tariffs among member states.
- ASEAN Economic Community (AEC): Aims to create a single market and production base.
- Security Cooperation: Addresses regional issues like piracy and natural disasters.
Example
ASEAN's AFTA has reduced tariffs on intra-regional trade to near zero, boosting trade among member countries like Thailand, Vietnam, and Indonesia.
How ASEAN Enables Globalization
- By reducing trade barriers and promoting regional integration, ASEAN attracts foreign investment and strengthens its global economic position.
Note
Unlike the EU, ASEAN does not have a common currency or centralized political institutions. Its focus is primarily economic and security-oriented.
Challenges and Restrictions
- ASEAN's decision-making is based on consensus, which can slow progress on critical issues.
- Economic disparities among member states make it difficult to implement uniform policies.
NAFTA/USMCA: North American Integration
- The North American Free Trade Agreement (NAFTA), now replaced by the United States-Mexico-Canada Agreement (USMCA), created one of the world's largest free trade areas.
Key Features of USMCA
- Tariff Elimination: Most goods traded among the US, Canada, and Mexico are duty-free.
- Updated Rules: Includes provisions on digital trade, labor rights, and environmental standards.
Example
A car manufactured in Mexico can be sold in the US without tariffs, as long as it meets specific rules of origin.
How USMCA Enables Globalization
- By reducing trade barriers, USMCA encourages cross-border supply chains and increases competitiveness.
Hint
USMCA's focus on digital trade reflects the growing importance of data and technology in globalization.
Challenges and Restrictions
- Stricter rules on labor and environmental standards can increase costs for businesses.
- The agreement's focus on North America may limit trade with other regions.
- The bloc is dominated by the USA and the dynamics of its internal politics.
Note
- Don't confuse free trade areas with export processing zones (EPZs).
- While both reduce barriers, EPZs specifically target export-oriented industries.
- Export Processing Zones (EPZs) are designated areas within a country that are set up to promote and facilitate export-oriented production through tax incentives or simplified regulations.
- Shenzhen Special Economic Zone (China) established in 1980 is an example of EPZ.
Migration Controls
- Migration policies play a critical role in globalization by determining the movement of people across borders.
The EU's Schengen Agreement: Open Borders
- The Schengen Agreement allows passport-free travel among 29 European countries, facilitating the free movement of people.
How Schengen Enables Globalization
- By removing border controls, Schengen encourages travel, tourism, and labor mobility, contributing to economic growth.
Note
- The Schengen Area includes 25 EU member states and 4 non-EU countries: Iceland, Norway, Switzerland, and Liechtenstein, highlighting its broader impact on European integration.
- The two EU countries excluded from Schengen are Ireland and Cyprus. Ireland has opted out of the Schengen agreement to maintain Common Travel Area (CTA) with the United Kingdom, whereas Cyprus faces political and security challenges as norther part of the island is occupied by Turkey.
Challenges and Restrictions
- Security concerns and migration pressures have led some countries to temporarily reintroduce border checks.
- The COVID-19 pandemic highlighted the fragility of open borders during crises.
- While removing border controls within the Schengen Area, more strict controls are applied along the external border of the area.
Common Mistake
Many students think all EU countries are part of Schengen. However, countries like Ireland and Cyprus are not members.
US Border Controls: Balancing Security and Economy
- The US enforces strict border controls, particularly along its southern border with Mexico.
- Despite such a restrictive policy there are estimates suggesting there are approximately 11 million illegal migrants in the USA.
- These migrants have different backgrounds: illegal land border crossings (majority), visa overstays, human trafficking.
Key Features
- Physical Barriers: Fences and walls to deter illegal crossings.
- Visa Policies: Strict requirements for work and travel visas.
Example
The US-Mexico border wall is a physical manifestation of these policies, aimed at reducing illegal immigration.
How US Policies Restrict Globalization
- While these controls enhance security, they can limit the flow of labor and reduce economic opportunities.
Note
- Migration policies often reflect a country's priorities, balancing economic needs with cultural and security concerns.
- Migration policies evolve in accordance with changes in domestic politics.
The Economic Impact of Migration
- Migration can boost economies by filling labor shortages and increasing diversity.
- However, restrictive policies introduced due to political, cultural, and security-related reasons may hinder these benefits.
Reflection and Broader Implications
- Policy frameworks are the invisible architecture of globalization.
- They determine whether borders are bridges or barriers.
- They shape global interactions - flows of goods and services, capital, technology, knowledge and information, cultural traits, and people.
