By Yaroslav Lissovolik

In emulating the progress attained by developed economies, the countries of the Global South may explore the pros and cons of country-specific modernization models such as Australia that delivered the longest streak of growth without a recession in 1991-2020 among the advanced economies. At the regional level the model that developing nations have been using as a key benchmark is the EU economic integration that has contributed to the launching of integration projects in different parts of the Global South. But while there are dividends for developing economies in having the EU regional integration model as a potential blueprint for building their regional economic platforms, there also needs to be an understanding of the critical role of national and regional peculiarities that will limit the applicability of the EU model in the more challenging conditions of the developing world.

The formation of regional integration platforms may be undertaken across all of the main regions of the Global South – in Africa it is driven by the African Union via the African Continental Free Trade Area (AfCFTA) project, in Latin America the potential platforms may include UNASUR or CELAC, while in Asia there may be greater coordination pursued among the numerous regional projects such as ASEAN, GCC, BIMSTEC and others. The benefits of EU-style regional economic integration for developing economies will be associated first and foremost with lower import barriers, greater intra-regional and South-South trade. The path of regional integration also allows developing economies to adhere to economic policy rules and convergence criteria that improve the quality of the economic policy framework. And as was the case with the EU, greater regional economic integration will serve to tame intra-regional rivalries and tensions, focusing the energies of developing countries on cooperative win-win outcomes.

A focus on an EU-style regional integration across the Global South may also enable the developing world to overcome the high degree of economic fragmentation due to weak regional linkages in production and trade. Greater economic integration will render the economic system of the Global South more consolidated and structured – thus far the developing world is notably behind the advanced economies in terms of the scale, scope and the prevalence of regional integration. A reinvigorated Global South that overcomes economic fragmentation will be in a stronger position to pursue partnerships with developed countries as well as to attain a higher degree of integration into the world economy. Perhaps most importantly, from the point of view of the world economy, successful regional economic integration across the developing world may become the single most important growth driver and economic liberalization factor in the coming decades. Regional economic integration projects such as ASEAN have already demonstrated the notable potential that regional economic integration can deliver for high and sustained economic growth of developing economies.

Going forward the EU model of regional integration will serve as a crucial reference point for the various regions of the Global South in building their own regional integration arrangements. The existence of such a model for the developing economies will facilitate the creation of similar regional platforms by making available some of the “integration tools” introduced by the EU such as convergence criteria, cohesion funds, regional financing arrangements and other institutional and policy-related instruments.

At the same time, the EU model may also create difficulties for those countries and regions that limit themselves to simplistic imitation of Europe’s integration blueprints – inevitably there will be a need to innovate as well as avoid some of the shortcomings of EU’s original model. Indeed, for the economies of the Global South regional integration may prove to be more challenging than for Europe due to higher levels of inequality within countries and regions. In the macroeconomic sphere regional integration will call for bringing down macro imbalances from levels that in terms of inflation and unemployment tend to be less favourable than in the advanced economies. Low levels of intra-regional trade and investment as well as the massive infrastructure gaps/connectivity deficits will also necessitate innovative approaches in the Global South to strengthen the economic fundamentals for regional integration. In the end, the model of regional economic integration in every region of the Global South will be idiosyncratic, with novel approaches needed to bridge the gaps between the EU model and the regional/national economic peculiarities of developing nations.

Yaroslav Lissovolik – Founder of BRICS+ Analytics.

BRICS+ Analytics