_ Yaroslav Lissovolik, programme director, Valdai Discussion Club; chief economist, Eurasian Development Bank. Moscow, 28 January 2019.
The process of economic integration is taking on increasingly trans-continental proportions in recent periods. The formation of such mega-regional blocks as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), also known as TPP11 or TPP-11 or the discussions on the creation of the Regional Comprehensive Economic Partnership (RCEP) points to the rising scale of trade alliances. Such trans-continental linkages are also increasingly observed in the Global South segment of the world economy, with China and India actively exploring the possibilities of integration projects with regional blocks and individual countries in South America and Africa.
The progression of economic integration to the stage of mega-regionalism may in part be a reflection of efforts to overcome the limitations of continental integration as well as a way to alter the balance of pros and cons in the integration process in a regional setting. As is the case with TPP-11 or the creation of the Pan-African continental free trade arrangement, the formation of the mega-regional blocks is based to a significant degree on the aggregation of existing regional integration groupings and FTAs.
The aggregation of the multiple regional and bilateral treaties into larger mega-blocks may become the key trend in economic integration in the coming years as the “spaghetti bowl” legacy of the past several decades of the emergence of hundreds of regional and bilateral agreements may be increasingly giving way to a more orderly pattern of pan-continental and trans-continental blocks subsuming the plethora of smaller scale alliances.
This aggregation process of the numerous integration agreements into larger alliances may provide greater coherence and stability to the global governance construct. In particular, it may facilitate greater coordination among the regional arrangements and improve the conditions for promoting large-scale connectivity projects. It may also provide a framework for greater coordination between global multilateral institutions and the layer of global governance that pertains to regional integration blocks.
Interestingly, there are examples of aggregation in international economic institutions that served to attenuate the problems of regulation and governance in order to overcome excessive fragmentation in voting patterns across countries. One case in point was with the GATT/WTO and the introduction of the “Quad”, which was meant to represent the largest players as representatives of the developed and the developing world – China and India from the Global South and the US and the EU from the advanced economies.
Another example is the IMF and the World Bank, where the votes of individual countries are aggregated into larger constituencies (chairs). In many cases the choice of the basis for the aggregation may appear to be arbitrary or based on outdated patterns. Basing the aggregation process on the “revealed preference” of the respective countries that is based on regionalism may generate more stable and objective outcomes.
With the pan-continental integration addressed in various degrees in almost all of the world’s continents, Eurasia today stands as the “last/final frontier” where such integration of continental magnitude is yet to be fully addressed. This is in spite of the fact that it was precisely in Eurasia that the first pan-continental theories of economic integration originated. The Grand Eurasia concept coming from Russia has become one of the more actively discussed subjects in the past several years with grand connectivity projects such as BRI serving as the main life-line for the formation of such a project. Furthermore, it was in Europe that the most advanced and large-scale cross-country integration initiative took place.
The fact that Eurasia is the largest of all continents in terms of land-mass is only part of the challenge. The key barrier is the high degree of fragmentation of the integration blocks, with ample scope for aggregation of the integration initiatives on the Eurasian continent.
The short-cut to reaching the goal of continental integration could be to focus the Grand Eurasia project on aggregating some of the existing integration blocks in the region and increasing infrastructural connectivity (rather than outright free trade), including through forming a pan-continental digital framework of regulations and standards that would facilitate the movement of goods and services even with the maintenance of tariff barriers.