Thanks to ‘twinning,’ the functional integration of economies has become a universal trend

by Andrey Borodaevskiy

There is plenty of recent evidence regarding the tight interaction and functional cohesion between the two economies of the United States and China.

This is a peculiar case of economic integration, to which one is inclined to apply a special term — “twinning” because the partners with their outstanding economic potentials do not belong to one economic region and are divided by a gulf of social and political differences.

However, an attentive eye can find other “Siamese twins” in the modern world, though not so mighty and unique as the “pair” described above but also viable and competitive enough.

As a far-advanced, albeit not so well-known, example we can cite the integration system in Oceania oddly named “Closer economic relations” (CER). It unites the two former British territories in the Pacific — Australia and New Zealand, which have introduced a free-trade area more than four decades ago and are bound to create a customs union through a common external tariff and a common competition policy.

Economic integration, with its functional aspect summed up in the term twinning, embraces almost all more or less developed economic regions of the modern world. One of them, in which the absolute economic leader — the United States — serves as the core element, is North America with its continent-wide industrial complex cemented by the famous North American Free Trade Agreement. The second major integration system embraces the vast area of the European Union and has already united almost all big and small “children” grown up in this “cradle of the Western civilization.”

Among the biggest pairs of countries, according to their bilateral turnover, the first four positions are occupied by the U.S. with its major partners (Canada, Mexico, China, Japan), while mutual trade of the EU member-states forms around two-thirds of their overall trade turnover.

It is worthwhile to note that in both cases the flows of goods only partly bear commercial nature, the considerable rest servicing production and technological ties of transnational corporations.

Not many perceive the obvious truth that America can take a unique stand in the world — as the one and only “superpower” — partly thanks to its century-old and extremely firm ties with Canada, a highly reliable neighbor.

Nowadays, the economic and military U.S. machine has at its disposal a mighty hinterland of the whole North America, while twinning processes are now embracing not only Canada but also Mexico and, to a certain degree, Chile (which is, for all practical purposes, included into the NAFTA arrangements).

In Europe, the common market within the steadily expanding EU has been transformed into a single market, by its nature corresponding to the criteria of the domestic market of a nation.

Here geo-economics reigns supreme, while many geopolitical issues, which looked unsolvable in the past, are now removed from the EU agenda. For example, the historic Franco-German confrontation concerning the raw materials base for iron and steel industry dissolved like smoke, and even in the traditionally restless Balkans the situation has been drifting toward social and political tranquility, while the centripetal forces began to overcome the centrifugal ones.

In East Asia, a very interesting new organic formation could be found in the form of tight and well-coordinated cooperation between Japan’s industry proper and its components located in other nearby countries — in South Korea, Hong Kong, Taiwan, Singapore, in other ASEAN countries, and, as of late, also in the coastal regions of mainland China (the famous phenomenon of Japan’s “offshore production”).

Specialists also note the high degree of coordination, in some cases resembling the renowned just-in-time system, achieved in the sphere of industrial materials supply to Japanese plants from Australia and British Columbia.

The Asia Pacific super-region is on its way to becoming a vast zone of intensive economic cooperation, displaying the triumph of geoeconomic principles over traditional geopolitics and “gunboat diplomacy.”

As for the Atlantic, dividing (or, nowadays, rather connecting) the two economically most powerful regions of the world — Europe and North America, here geoeconomics reigns supreme already over six decades — without any special arrangements of “Trans-Atlantic FTA” type but exclusively on the general basis of the GATT and with the help of massive two-way migration of investment capital.

Also, the mechanism of the NATO is instrumental in making the military-strategic situation in this oldest super-region of the civilized world stable and predictable.

Aside from East Asia, where the U.S. has two of its most important economic partners — Japan and China — the U.S. it has been striving to secure its mass-scale presence also in the south of Asian continent. Here the main emphasis was made on the versatile twinning of the U.S. businesses, especially in tertiary sector, with Indian partners.

For the sake of this strategic goal, the U.S. may, it seems, revise its geopolitical priorities and even revoke — sooner or later — its current stake on military cooperation with Pakistan. In their turn, India and China, up to now divided by many political and territorial frictions, have been also looking for a firmer basis, a geoeconomic one in its essence, for the development of their bilateral relations in the 21st century.

As for the 10 members of the Association of Southeast Asian Nations (ASEAN), they are on their way to a more advanced system of tighter sub-regional cooperation. The former colonial Indochina is also not forsaken by the economic world leaders — neither by the U.S., nor by Europe and, especially, not by their mighty economic counterparts in East Asia.

The most promising developments are connected with the two major cooperation projects — “ASEAN Plus Three” (Japan, China and Korea), and “ASEAN Plus Six” (same Asian partners plus India, Australia and New Zealand).

In contrast to North America, the picture in the lower parts of the Western Hemisphere — in Central and South America — remains not quite clear so far. If twinning is in store for this vast area brimming with activity, a crucial question arises: twinning by whom, with whom and in what way?

Who will be the twinning partners of Latin American countries?

Will such developments happen under the aegis and with the active participation of the U.S., or will stimuli and motivations come from other sources — local, regional or sub-regional?

Will it be a “Great American Project” or, vice versa, will integration processes bear a certain anti-American flavor?

Among the subregional groupings of integrative nature with exclusively South American participation, Mercosur and Ancom stand obviously out. They are quite successful in developing cooperation schemes of their own, have achieved a high degree of coordination in their trading policies and are typically involved in negotiations with various partners outside the Western Hemisphere, (like the prolonged dialogue between Mercosur and the EU).

What has been happening in other parts of the globe, however, hardly can be easily summed up and needs separate analysis, case by case. Appearing especially controversial and full of intrigue are centripetal and centrifugal tendencies in the area of the former Soviet Union.

Russian professor Andrey Borodaevskiy, with a half-century of research and teaching experience in economics and international economic relations, is coauthor of the monograph “Russia in the Diversity of Civilizations” (Moscow, 2011).