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Past Analysis
Regional Integration and Peace
Philippe De Lombaerde
May 09, 2005
Visiting University for Peace professor Philippe De Lombaerde gives an overview of regional economic theory and its causal relationship to regional security.



The existence of (positive) linkages between regional economic integration and peace and security is accepted by many and is an assumption behind many contemporary discourses in favour of more cooperation and integration at the regional level in order to avoid or end bilateral, regional and even domestic conflicts. European post-war history and the initial phases of European integration are thereby explicitly or implicitly presented as a demonstration of the validity of the assumption. The contribution of cooperation in functional areas to regional peace was even elevated to the status of theory by functionalist theory (Mitrany, 1966, 1975). It is often assumed that this experience is replicable in other parts of the world. This short note simply presents a few considerations on these linkages with the only purpose to help to clarify these linkages, both conceptually and empirically.


A few initial remarks are needed.


First, conceptually, the distinction between ‘traditional’ security (SEC) and human security (HSEC), including economic security (ESEC), should obviously be made. One should be aware, further, that a grey zone exists between regional and national security issues. Due to continuing trends towards internationalisation, mobilisation and globalisation of actors and processes, leading to ever higher levels of interdependence, the distinction between the former and the latter is often difficult.


Second, when discussing the linkages, one should distinguish between the regional economic integration (REI) - security linkage (REI « SEC) and the regional economic integration - regional security policy (RSP) linkage (REI « RSP). The linkages between regional security policy and the actual levels and dynamics of security (RSP « SEC) fall outside the scope of this note. The linkages are further theoretical and/or empirical. In debates, this distinction is not always made very clear.


When the relatively neutral and pluriform concept of ‘linkages’ is used, it is because of the fact that a conceptualisation (and understanding) in terms of causalities is probably too narrow to grasp reality. It is important to look for causal relationships between variables, especially from a policy perspective, but it should be understood that these relationships are part of a complex system where a systemic logic may dominate and history and institutions play a role. In addition, it is preferable not to limit the analysis to the interactions among abstract ‘actors’ or ‘states’ but to take also their scale, power and centrality, leading to asymmetrical relations, into account.




The obligatory starting point for the treatment of these linkages is the old debate between mercantilists and classical liberal economists on the pros and cons of economic openness. According to the former, international economic interaction almost necessarily leads to conflict because of disputes over the access to resources, the distribution of the gains-from-trade, and/or over trade imbalances. In an anarchic world, economic interaction is basically a zero-sum game where states pursue national interests at the cost of other states. However, according to the latter (Smith, Ricardo and followers), free trade contributes to the diffusion of economic prosperity and tends always towards balanced trade; economic interaction is a positive-sum game contributing to peace and stability. In this initial approximation to the problematic, the relations between economic openness and peace and security could thus – theoretically – be positive or negative. Note that in both approaches, causality runs from (international) economic interaction to peace and security, and not the other way round.


The liberal view is founded on a micro-economic logic based on the expected positive effects of the occurrence of different types of international exchange (flows). REI leads to more trade and more intense capital flows, in turn leading to higher levels of interdependence and “trust”, more secure access to strategic resources, and lower threat of trade embargoes. This is supposed to lead to welfare, peace and stability (Schiff and Winters, 1998, 2003). Higher levels of interdependence increase the cost of war and the political pressures against war.


It remains a fact, however, that trade can be a source of conflict in certain circumstances. This is the case when the distribution of the benefits of REI is politically unacceptable and convergence among trade partners not automatic, and when negative effects are present for third countries, for example, trade diversion because of discrimination.


For political reasons, REI does not always imply the free intra-regional movement of people. But REI which leads to higher activity levels and more trade and investment flows, might further ease the pressure to migrate (which was expected e.g. in NAFTA and with the EU Enlargement). On the other hand, the combination of intra-regional mobility with higher extra-regional barriers to mobility (the European model) might well lead to a concentration of migration and refugee problems on the external borders, in turn creating a new potential source of insecurity.


Moving up from the micro-economic level to the strategic policy level, REI can lead to objectively converging economic interests (Hugon, 2002), reducing again the probability of conflict.


When the regional integration process “deepens” and becomes multidimensional (covering different policy areas: economic, political, infrastructure, etc.), this permits bargaining between the different countries involved, which might also reduce the probability of conflict.


In a number of integration initiatives, regional security appears as a policy objective of REI, not just an “outcome”. Examples include: ECSC (1951), EEC (1957), ASEAN (1967), MERCOSUR (1991). This raises questions about causality: is it the absence of security, or the low level of security, which leads to REI? This would mean: SEC ® REI (inverse causality).


Virtuous circles are possible: REI ® trade ® peace/SEC ® REI ® … This is especially the case when peace generates a significant and visible peace dividend, which fuels the integration process.


Empirical analysis on the REI « SEC linkages are relatively scarce. According to Polachek (1992, 1996), trade reduces the probability of conflict between countries but the causality is limited. In addition, democracy (probably related to economic freedom) has an independent positive effect on trade and the probability of conflict. Nevertheless, it is also true that trade issues can lead to conflict and that trade instruments can be used for political purposes (e.g. US embargo on Cuba, management of Iraq’s oil revenues, etc.).


There is apparently a need for more sophisticated empirical research on the linkages between REI and SEC




Economic security is one aspect of the much wider concept of human security. The concept is not very much developed since the oil crises of the 1970s and is almost absent from the economics profession. It is also an ideologically loaded one. What could be observed, however, was a gradual shift from a concept of national economic security to a concept of individual economic security. The concept is linked to the concept of “economic rights” (for example, the right to work).


Returning to the macro-level (countries, communities, societies), a widening and deepening of regional economic integration leads almost by definition to higher levels of interdependence and lower levels of self-sufficiency. If auto-sufficiency is equated with security, as is the case in certain political discourses, then REI would be negatively affecting ESEC. A special case is probably food security. In the debates on the EU, the FTAA and other schemes, food security has indeed been used as an argument against further integration and openness. Here, the credibility and sustainability of the regional integration scheme come apparently in as crucial and determining variables, and make the relationship between REI and ESEC ambiguous, at least ex ante.


A counterargument is that regional economic integration might well have the capacity to secure access to (strategic) resources and goods, thus suggesting a positive linkage: REI ® ESEC.




The linkages between REI and RSP are various. First, there are economic rationales for preferring RSP above national security policies. Second, REI can contribute to the design and building of regional institutions, including decision making processes, and the sequencing of policies, all necessary elements for a RSP. Third, REI can contribute to the financing of an RSP.


In the following paragraphs we will have a look at these different linkages. Before that, it should be reiterated that a distinction should be made between national and regional security issues, recognizing, at the same time that a grey zone exists between the two and that spillover effects occur.


The economic rationales for an RSP with national security objectives include:


-         military-technical economies of scale (especially when the region is composed of small states),

-         the benefits of sharing know-how,

-         the benefits of having a set of club rules (covering: limitations on defence spending, property rights, democratic clauses, civil rights, etc.),

-         the “neutrality” of a (regional) security apparatus vis-à-vis (national) group interests,

-         the existence of intra-regional negative external effects of national conflicts in border zones, on neighbouring export markets, on the image of a region as a destination for FDI and tourism, etc.) (e.g. in the case of the Colombian conflict).


On the other hand, the economic rationales for a RSP with regional security objectives are related to:


-         the regional scale of the conflict,

-         the nature of border conflicts,

-         the occurrence of negative spillovers,

-         destabilising migratory flows,

-         prisoner dilemmas (leading to an uncoordinated military build-up like in the India-Pakistan case),

-         common external threats,

-         external (extra-regional) political objectives and creation of extra-regional bargaining power.


Contrary to early liberal thinking according to which international political institutions would not be needed, today’s REI schemes contribute usually to supra-national institution building. When these institutions are of a minimal quality, have generated a certain level of trust, and provide coordination mechanisms, then a stepwise extension of competences (incl. RSP) becomes possible, following the functionalist model. In this context, one should be aware of the fact that there are different models of REI (European, NAFTA, Asian, …) leading to different levels and modes of supra-national institution building. This is also relevant from the point of view of the speed and effectiveness of regional decision making, which is crucial in the security area. A consensus model of regional decision making, for example, might lead to slow and ineffective intervention. Another consideration in this respect is related to the fact that regional economic organisations and regional political organisations do not always perfectly overlap. This is the case in Europe, the Americas and elsewhere. This makes a dynamic process along the lines of the functionalist model more difficult. However, one might expect that the economic pressure to streamline the regional institutional framework may well lead to institutional convergence and rationalisation in several regions in the world in the not-so-distant future.


Regional (economic) integration can provide the necessary financial resources to build and finance an RSP with its features of a regional public good. Financing a regional security apparatus on an inter-governmental basis might be more difficult to realise. The adequate level of the provision of the public good could theoretically be determined on the basis of fiscal federalism considerations (scale, externalities, mobility). Costs and benefits of different arrangements should be assessed, probably best on a case-by-case basis. For example, choices have to be made between ad hoc financing and structural financing, and between a system based on member states contributions or on “own” regional resources. Both technical, economic and political criteria have to be used to come to an acceptable burden sharing. The role of a regional hegemon, willing to carry a higher-than-proportional share of the burden and incur in sunk costs, can be crucial in this respect.


Conclusions and research agenda


In order to conclude these reflections on the REI « SEC linkages, I suggest a few issues that could be included in the (economic) research agenda:


-         more work should be done on the economic analysis of causes and consequences of regional peace and conflict;

-         more research should be done on the financing and contractual modalities of different RSP schemes;

-         more theoretical and empirical analysis should be done on the optimal size of regional security areas and regional security budgets, and on the question whether the (regional) security area should coincide with the (regional) economic area;

-         further work could be done along the lines suggested by Tavares (2004), linking different levels of regionness to different levels/types of regional peace, agents of peace and instruments of peace and security.

References Hugon, Philippe (2002), “Les économies en développement au regard des théories de la régionalisation”, Revue Tiers Monde, XLIII(169):9-24. Mitrany, D. (1966), A Working Peace System, Quadrangle Books, Chicago. Mitrany, D. (1975), The Functional Theory of Politics, Martin Robertson and Company, London. Polachek, S.W. (1992), “Conflict and Trade: An Economic Approach to Political Interactions”, in: W. Isard and C.H. Anderson (eds), Economics of Arms Reduction and the Peace Process, North Holland, Amsterdam. Polachek, S.W. (1996), “Why Democracies Cooperate More and Fight Less: The Relationship between International Trade and Cooperation”, Review of International Economics, 5(3):295-309. Schiff, Maurice and L. Alen Winters (1998), “Dynamic and Politics in Regional Integration Arrangements”, The World Bank Economic Review, 12(2):177-195. Schiff, Maurice and L. Alen Winters (2003), Regional Integration and Development, The World Bank, Washington DC. Tavares, R. (2004), “Contribution of macro-regions to the construction of peace: a framework for analysis”, Journal of International Relations and Development, 7:24-47.
Philippe DeLombaerde is a Research Fellow at the United Nations University - Comparative Regional Integration Studies (UNU-CRIS), Bruges; he was a Visiting Professor at the University for Peace, San José, and can be contacted at