New Dimensions of Economic Regionalism. BRICS' Integration and Independence through Globalization

Essay, 2019
10 Pages



Emerged into an important platform for cooperation among emerging markets and developing countries, the BRICS countries come from Asia, Africa, East Europe, and Latin America and all are members of G20. Together they account for 26.46% of world land area, 42.5% of world population, 13.24% of World Bank voting power and 14.91% of IMF quota shares. According to IMF’s estimates, BRICS countries generated 22.53% of world GDP in 2015 and have contributed to more than 50% of world economic growth during past 10 years. This paper posits that economic interdependence and economic integration among nation-states are of significance since the post-Cold War era, from where the expansion of the concept of economic regionalism happened. The concept of economic regionalism focuses on an institutional arrangement designed to facilitate the free flow of goods and services and to coordinate foreign economic policies between countries. It is also characterized by FDI flows, migration, trade relations and cross-border relations. Growing economic dependence among countries is another feature through which peace and prosperity are brought as they function based on mutual interests. An interrogation of BRICS open economic regionalism in this paper departs from the premise that post-liberalized international system has adopted new dimensions of regionalism and the concept of ‘trade creating geography or space’ is becoming prominent.

Keywords: economic regionalism; economic integration; economic interdependence; gross domestic product; Regional integration; foreign direct investment; geographical proximity; multilateral system.


The concept of economic regionalism is defined as an empirically observable process of increasing cross- border activities, cooperation and coordination within a group of countries through integration. Originally, the concept of economic regionalism has been based on economic cooperation between natural partners (neighbouring countries or countries on the same continent). But since technological progress reduced transaction costs, intercontinental and global economic integration has become important in recent decades. Geographical distance may stay important for trade flows, but intercontinental relations of emerging countries record a steady rise in trade relations (Gil- Pareja et al., 2012). In general, regionalism could be defined as preferential cooperation among nations that are relocated in terms of geographical proximity, with certain common characteristics such as historical, cultural, political, and so forth. The objective of cooperation might be economic, political, or cultural in nature (Nye, 1968). In this context, the economic regionalism is considered more autonomous, outward- oriented, comprehensive and multi-dimensional process which included trade and economic integration, environment, social policy issues relating to security and democracy, where the nation-states and other actors played an important role.

The BRICS are a fine example of explaining this new dimension of economic regionalism (regionalism lesser importance on physical borders) where BRICS’s intra-regional trade relations become the binding factor towards its economic integration and independence. The existing literature is focused on the economic integration of the five emerging countries, for example, related to intra-BRICS trade (Chatterjee, Jena, & Singh, 2014; Sharma & Kallummal, 2012) and FDI policy (Mlachila & Takebe, 2011). Developed by (Balassa, 2013), the economic integration theory (EIT) assumes that increasing globalization and technological progress leads to freer trade and movement of economic factors as well as to deeper integration over time. It shows that physical border is no longer a criterion for economic interdependence and integration within a group while the concerns and common interests form important factors for a new dimension of economic regionalism.


Regional Integration Theory and Customs Union Theory necessitate an intelligible analysis on the concept of economic regionalism or the purpose of this paper.

Regional Integration theory

Regional integration theory entails functionalism and its modified version, neo-functionalism. David Mitrany first developed the logic of functionalism. Functionalism attempts to explore regional organizations to deal with common and social problems (Cai, 2010). The regional integration theory explored the relevance of the institutional mechanism under the regional organization. Neo-functionalism modifies functionalism in several important aspects. The primary modification is that makes essentially a theory of supranational state – building and not just an approach to the management of international interdependence through a “working peace system” (Pentland, 1990).

Political interdependence made through shared democracy which makes substantiated effective peace full mechanism under the regional group. In this context, BRICS countries are trying to build up within the concept of shared democracy by modifying the group’s institutional mechanism. Shared democratic decisions are more visible in the form of mutual interests and concerns of BRICS member states, which are enhanced to make a strong institutional mechanism. Theories of regional integration are becoming obsolescent because of three core assumptions on which these theories have been based and giving lesser relevance to the behaviour patterns actually displayed by governments active in regional organizations (Haas, 1975).

These three assumptions are 1) that a definable institutional pattern must mark the outcome of the process of integration, (2) that conflicts of interests involving trade-offs between ties with regional partners and ties with non-members should be resolved in favour of regional partners, and (3) that decisions be made on the basis of disjointed instrumentalism. The above three assumptions are helpful in building common interests among the member states of the regional organization which may lead to solidarity and cooperation. Regionalism emphasizes the dynamics of integration and identifies the role of supranational, transnational and sub-national actors in this regional integration process. The BRICS are enhancing their identity in a multilateral system through mass investments in underdeveloped countries.

Customs Union Theory

Jacob Viner was the eminent economist adherent of economic regionalism and regional trade arrangements (intra-regional trade) during the post-war period. He posited that regional trade arrangements can lead to trade creation, if regional trade arrangement members switch from inefficient domestic producers and import more from other members of the regional trade agreement. On the other hand, trade diversion takes place if members switch imports from low-cost production in the rest of the world and import more from higher-cost producers in the partner countries. Trade diversion lowers welfare not only the partner countries but also the rest of the world too. Viner’s analysis shows that trade creation and trade diversion have opposite welfare implications and the net effect will happen on which of these two effects dominate (Viner, 1937).

Viner took a broad view of a regional customs union, and his analysis is relevant to most regional preferential trade arrangements. “One of the numbers of arrangements for reducing tariff barriers between political units while maintaining barriers against imports, from outside the regions” while a ‘perfect customs union’ defined as an arrangement, which meets the following condition. Customs union is more likely to operate in the regional free trade direction, whether the assessment is in terms of its consequences for customs union area alone or for the world as a whole.

The Viner’s theory was later modified and broadened by (Geherls, 1956; Lipsey, 1957; Collier; 1979), who introduced into their model’s other welfare effects, such as consumption effects and terms of trade effects, in addition to the production effects. Lipsey’s 1960 survey article was an important summary of the developments of customs union theory in the 1950’s, though research on the welfare effects of changing trade flows continued thereafter. Trade, production, and welfare are correlated with each other in regional integration.

Viner concludes the discussion of economies by emphasizing that “customs unions are from a regional free trade point of view, not necessarily good nor necessarily bad; the circumstances discussed above are the determining factors”. In this context, free flow of goods and services helped in reduce the tension between nation states in a group. In this way customs unions have great advantages out of each national economy in the group and protects domestic industries from external threats. The BRICS trade union protects its domestic industries from external threats (not put forward external tariff mechanism) and advantages on trade creation through intra-regional trade.


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New Dimensions of Economic Regionalism. BRICS' Integration and Independence through Globalization
University of KwaZulu-Natal
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dimensions, economic, regionalism, brics, integration, independence, globalization
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Monica Simangele Maphumulo (Author), 2019, New Dimensions of Economic Regionalism. BRICS' Integration and Independence through Globalization, Munich, GRIN Verlag,


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