Regionalism is a force in the global economy that is finally starting to receive its due recognition on the international arena. The highlight of this trend was the 2023 decision by the G20 to admit the African Union (AU) as a full-fledged member. The importance of regional factors in dealing with the ongoing economic challenges in the global economy also came to the fore during the Annual meetings of the IMF and World Bank in the fall of 2023, when the World Bank announced the formation of a platform for multilateral development banks (most of them regional development banks). Another trend observed in 2023 was the rise of the regional powers from the Global South and a string of their applications to join BRICS. This in effect positions BRICS+ as a potentially crucial platform for bringing together not only individual emerging economies, but also their regional integration arrangements. All of these developments were not only expected but were also actively advocated by BRICS+ Analytics throughout this year and still yet as early as 2018 in Valdai club reports.
These regionalization trends that are becoming palpable in the global economy may well further intensify in 2024. One of the most important events in 2024 associated with the expansion in the role of regionalism may be the conclusion of the EU-MERCOSUR trade deal. This would in effect be the first full-fledged trade accord concluded between large trade blocs with the aim of liberalizing trade. The attainment of an accord between the two regional groups will need to be reached in the first half of 2024 in order to avoid renewed delays that may follow after the EU parliamentary elections to be held on June 6-9, 2024.
Another important trend to watch in 2024 is Brazil’s presidency in the G20. Brazil’s leader Lula has already indicated that reforming global governance will be one of the priorities of Brazil’s G20 presidency. At the same time Lula is also an active proponent of regional integration and cooperation among regional economic blocs – his efforts to breathe new life into MERCOSUR and to revive UNASUR are just some of the items on his regionalist agenda. It may hence be expected that Brazil could use its G20 presidency to invite more regional blocs into the G20 global forum after the AU became its member in 2023. One of the possible modalities of this greater integration of regional blocs into the G20 could be the creation of a platform for regional integration blocs as an engagement group within the G20 – a regional R20 similar to B20 (Business 20) and other such engagement groups. Alternatively, Brazil could also invite other regional integration blocs such as MERCOSUR as full-fledged members of the G20.
As for the BRICS bloc, Russia’s presidency will explore the possibility of bringing the BRICS closer with such regional groupings as the Eurasian Economic Union and the Shanghai Cooperation Organization. Such a format of “integration of integrations” appears to be incomplete – it does not explicitly involve the participation of other regional economic blocs in which BRICS countries are members – BIMSTEC, MERCOSUR, African Union being cases in point. Furthermore, thus far there is not clear roadmap of trade liberalization to be pursued on the basis of such BRICS-led platforms of “integration of integrations”. In essence there are two possible tracks for the “integrations of integrations” within BRICS – either the geopolitical/dialogue track (bringing non-FTA regional groups such as SCO, UNASUR, etc); and the economic track that brings together blocs such as the EAEU, AfCFTA, MERCOSUR and others that target trade liberalization. The latter route would be the most pragmatic and beneficial mode of the “integration of integrations” for the Global South, most notably for Africa and the AfCFTA project.
On the latter note, the evolution of the AfCFTA is yet another important development in regionalism to watch out for in the course of 2024. Next year we may witness the first steps undertaken by Africa to explore the possibilities of connecting AfCFTA with other regional initiatives and to equip it with new development institutions. In particular, it is expected that in Q2 2024 a USD 10 bn AfCFTA Adjustment Fund is due to launch its operations. The Fund is meant to boost intra-Africa trade and consists of the Credit Fund, the General Fund as well as the Base Fund – the latter sub-fund will compensate tariff losses and other possible adverse implications arising from the implementation of the AfCFTA agreement.
Overall, regionalism will become a more tangible trend in the world economy. It is becoming more entrenched in global fora such as the G20, it is playing a crucial role in trade liberalization and market openness (AfCFTA, MERCOSUR-EU deal), it may also become an important partner for global organizations such as the IMF, World Bank and the WTO in dealing with the rising pile of global problems and imbalances. In fact, with respect to the WTO regional integration blocs may become a crucial force in revitalizing this global trade body through closer coordination of their trade liberalization initiatives. Some observers may take the regionalization trends as a step back from the top-down globalization observed in the preceding decades. Be it as it may, such steps will need to be undertaken by the global economy in order to resume its forward advances – the old model of the development of the world economy has encountered its dead-end in one of the corners of the “globalization maze”.
Image by jossuetrejo_oficial via Pixabay