ABSTRACT
In its most accepted usage of the concept, economic integration entails the bringing together of countries into, de minimis, a free trade area, a state of affairs that can only be achieved through the elimination of all impediments to trade between these countries (Balassa 1961). The experience of the EU epitomizes a level of deep economic integration when compared with other cases such as the ASEAN for example. Trade and investment have undoubtedly been important drivers of the (mostly successful) economic integration in Europe since the signing of the Treaty of Rome in 1957. Yet, the occurrence of the 2008 GFC questions what was thought to be an acquis; the crisis has indeed revealed that the extant type of economic integration through trade and investment (in particular financial investment) in the EU is far from being robust. It might therefore be timely to question the pertinence of what can be called a ‘sustainable’ form of economic integration, or a type of economic integration that is able to withstand major macroeconomic shocks such as a financial crisis. Starting with the comparative analysis of trade and investment links between countries as the usual drivers of economic integration, this chapter will develop this notion of ‘sustainable economic integration’. The idea is to ascertain whether only a specific type of trade and investment links, as drivers of economic integration, lead to a form of economic integration that lasts and is resilient to major economic shocks. It will therefore question the robustness of today’s economic links observable in the EU when faced with the challenges posed to them by serious macroeconomic disturbances (such as crises); as will be seen here, the study of trade and investment as drivers of ‘sustainable’ economic integration implies connecting them with the notions of both business cycle co-movement and current account imbalances at the EU level (Section 3). Before it does that, the chapter will review the types of economic integration in Asia and in Europe before and after the Second World War at these different periods of time (Section 2). The descriptive terms that best suit the pre-Second World War time-period are ‘forced’ and ‘aborted’ economic integration. It will show how the same
drivers (trade and investment) can lead to radically different types of economic integration.
