Abstract
There is a strong presumption among economists that domestic reforms are promoted by regionalism. Yet strong empirical evidence for this proposition is lacking. This chapter examines both the theoretical arguments and empirical evidence on this issue, drawing on the relevant economic, political, and legal literature. The authors argue that in general, the case for reciprocity in domestic reforms is weak. In the one case where a regional agreement appears to have promoted domestic reform—the European Union (EU)—the enforcement mechanisms used by the European Court of Justice played a significant role. But those mechanisms are not unique. Instead, the authors argue that the EU’s success was because domestic constituents were empowered to take action against uncompetitive regulation. Thus the EU promoted economic reform in sensitive, behind-the-border areas because it overcame the problem of loss of sovereignty by internalizing the political battle to domestic interests, and yet still provided a non-political frame of reference for the debate.
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Notes
- 1.
Ethier (2001) identifies these as countries that until recently adopted basically-autarkic, anti-market policies.
- 2.
The argument of Bagwell and Staiger (1999) in the context of simple tariff reform does not depend on the motives of government.
- 3.
Francois (1997) notes that the crisis did not lead to the re-imposition of exchange controls or a dramatic increase in protection, in part because of strong intervention by the United States and the International Monetary Fund—in this qualified sense, NAFTA did provide a policy anchor to the reforms already in place. But NAFTA had not led to further structural reforms.
- 4.
Becoming a member of the EU is like becoming a member of a club: the state does not get to pick and choose which parts of the treaties it will bind itself to. However, in particular instances—the United Kingdom’s and Northern Ireland’s refusal to adopt the euro, for example—all the Member States agree upon the primary provisions of EU law in relation to the euro and then they all agree to a Protocol under which, in this case, the United Kingdom and Northern Ireland can “opt in” at a later stage, upon notifying the Council of Ministers of their intention to do so. So in an EU context, the exercise of state sovereignty and the adoption of treaty provisions operate differently from in “mainstream” public international law, including that of the WTO and regional trade agreements.
- 5.
See Stone Sweet (2010) for a summary in precisely these terms.
- 6.
Note, however, that with the final version of the recent Services Directive, the EU has stopped short of allowing the regulation in the country of origin to automatically prevail when services are traded cross-border (McNaughton 2011).
- 7.
As noted above, the interpretation of violations became broader in the sense that it moved away from the notion of discrimination to one based on impediments to free movement. But in another respect, the interpretation of violations became narrower, because judicial interpretations of allowable derogations also became broader (Barnard 2010).
- 8.
The doctrine of direct effect has also been extended beyond Treaty provisions, and also applies to certain Community directives.
- 9.
Lower national courts can refer such questions at their discretion; national courts of last resort are required to request the assistance of the European Court of Justice.
- 10.
Of the 356 complaints brought between 1995 and 2006, 227 were brought by high-income WTO members and only one was brought by a least developed country.
- 11.
Multilateral action can nevertheless help to overcome terms of trade externalities, as noted earlier.
- 12.
Note that under the processes of the European Court of Justice, even the issues self-select.
- 13.
The current WTO agreement on Government Procurement is plurilateral.
- 14.
When the doctrines of direct effect and supremacy were first developed, there were only six Member States of what is now the EU, and the legislative voting pattern in the Council of Ministers was by unanimity. Since then, there have been changes in the voting patterns in the Council, with the introduction and then modification of Qualified Majority Voting. In addition, a “co-decision” procedure has been introduced for legislation, under which both the EU Parliament and the Council of Ministers must consent to a measure for it to be adopted. These changes have contributed to the further/deeper integration of the EU legal system, and to further reforms at the domestic level in EU member states.
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Dee, P., McNaughton, A. (2014). Promoting Domestic Reforms Through Regionalism. In: Capannelli, G., Kawai, M. (eds) The Political Economy of Asian Regionalism. Springer, Tokyo. https://doi.org/10.1007/978-4-431-54568-2_6
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