Mechanisms of Global Economic Cooperation and Integration

Posted on Apr 3, 2025 in Social sciences

Regional Economic Cooperation and Integration

Economic Cooperation: OECD & Official Development Assistance

International trade relations can exist in three states:

  1. Uncommitted Relations: Based merely on the transfer of goods and services between countries through commercial interactions.
  2. Economic Cooperation: Involves commercial relationships supplemented by formal agreements between countries.
  3. Integration: Goes beyond cooperation by eliminating barriers to approach and achieve a single market.

Note: Greater integration implies less national sovereignty and more restrictions for a country.

Types of International Cooperation:

  • North-North Cooperation: Occurs exclusively between developed countries. Key bodies include:

    • OECD (Organisation for Economic Co-operation and Development): The successor to the OEEC (Organisation for European Economic Co-operation) established after the Marshall Plan, serving as an instrument for coordinating economic relations. Its features include encouraging free trade, coordinating economic policy, and analyzing problems to find solutions. Within the OECD, the DAC (Development Assistance Committee) aids less developed countries.
    • G8 (Group of Eight): Historically decided major economic guidelines affecting member nations and, to some extent, the world. (Note: Political contexts evolve, e.g., G7).

  • North-South Cooperation: Takes place between developed countries and developing countries. Major actors include:

    • UN (United Nations): Aims to maintain international peace and security, foster friendly relations among nations, and promote social, economic, cultural, and humanitarian cooperation. Key agencies related to economic matters include the IMF, World Bank, FAO, UNICEF, UNESCO, etc.
    • EU (European Union): Provides aid to less developed countries, notably through the FED (European Development Fund). Historically, preference was given to former colonies, particularly those of France and Britain.
    • OECD DAC (Development Assistance Committee): Facilitates aid from developed member countries.
    • Bilateral Cooperation: Direct cooperation between one developed country and one developing country, offering support such as healthcare, technical assistance, and food aid. Benefits are often tied to acquiring goods and services from the donor country.
    • Other Agencies: Including Non-Governmental Organizations (NGOs).

International Economic Integration: Advantages & Disadvantages

Integration involves removing obstacles to create a larger market, which implies a cession (giving up) of some national sovereignty.

Advantages:

  • Generating economies of scale.
  • Increasing competition, which implies improvements in price and quality.
  • Enabling specialized production.
  • Providing greater collective bargaining power.

Cohesion among member countries is an essential factor for achieving the benefits of integration.

Stages in the Integration Process:

  1. Free Trade Area (FTA): Elimination of internal tariff barriers among members, while each maintains its own external tariffs with non-member countries (e.g., NAFTA – involving the U.S., Mexico, and Canada).
  2. Customs Union: An FTA plus the adoption of a common external tariff. Economic policies are harmonized to some extent.
  3. Common Market: A customs union that also incorporates the free circulation of factors of production (labor, capital).
  4. Economic Union: A common market where economic policies (monetary, fiscal) are completely harmonized, resulting in a significant loss of national sovereignty in these areas.
  5. Political Union: The ultimate stage involving complete harmonization and the creation of supranational governing bodies. No perfect example exists today.

The EU and Other Integration Examples

The EU is a prominent example of deep integration. (As of the text’s original context, early 2007, it had 27 members with plans for expansion).

Basic EU Institutions (Illustrative, based on text’s context):

  • European Parliament: Responsible for the overall budget, legislative input, and democratic control over the Commission and Council. Composed of Members (MEPs) elected by universal suffrage every 5 years (number varies, context mentioned 785). Headquartered in Strasbourg.
  • Council of the European Union (Council of Ministers): Composed of ministers from member state governments. A key legislative body. Decisions are usually approved by qualified majority, though unanimity is sometimes required. The presidency rotates among member states every 6 months.
  • European Commission: An independent body that proposes new laws and acts as the EU’s executive arm. Consists of Commissioners appointed with Parliament’s approval (number varies, context mentioned 30).
  • Court of Justice of the European Union (CJEU): Ensures uniform interpretation and application of EU law. Composed of one judge from each member country plus Advocates General (context mentioned 8 lawyers). Based in Luxembourg.
  • European Court of Auditors (ECA): Monitors the correct application and management of EU funds (income and expenditure). Oversees the common budget and controls its management. Composed of one member from each member state (context mentioned 30), appointed by the Council. Based in Luxembourg.