| Regional Integration The regional dimension of economic integration should be seen as complementary to the integration to the world economy, which may bring about subtantial benefits to developing and transition countries if adequately managed. The benefits from accrued intra-regional trade are well known: the importing country is in a position to meet its demand for consumption and production without having to ship in goods from great distance, while the exporting country gains without incurring large transport costs and by enlarging the scale of its production, which reduces costs. Further, from an investment point of view, many low-income countries do not have the necessary economic size to be sufficiently attractive for foreign investment. The preferential access to neighbouring markets – both for goods and services – which can be established through the negotiation of free-trade agreements or customs-union enable partner countries to make use of regional specialization and increase the size of their internal market, thus becoming potential hubs for goods and services throughout the region. Many initiatives have thus been launched - examples thereof are the Euromed Initiative, as well as the Stability Pact for deepened regional cooperation in the Balkans, following the peace process – which, beyond their economic dimension, aim at strengthening political, social and cultural links among the concerned partner countries. While during the last decades, regional integration was largely a North-North initative, respectively took the form of asymmetric North-South preferential schemes (e.g. GSP, Lomé, Cotonou agreements), this has changed, and more and more developing and transition countries are negotiating and implementing various forms of regional integration agreement, to supplement and deepen their multilateral approach of economic cooperation. To ensure the highest possible “development friendliness” of regional integration vehicles, both the external and the internal dimensions of regional integration should be addressed carefully. Internally, the adequate institutional
structure, ensuring an efficient functioning should be designed
and implemented. Externally, the right “mix” and sequencing
of foreign trade instruments should be assessed and negotiated with
the trading partners, so as to sustain the economic developments
of the countries involved, and not – on the contrary- to limit
the necessary policy space for their sustainable development. IDEAS’ approach COTTON |