Comparative Regional Integration

This is a chapter by these two authors in Handbook of International Relations, edited by Walter Carlsnaes, Thomas Risse, and Beth A. Simmons. (pp. 480-499)
They begin the chapter by defining what a region is and what this term means. Defining regions:
1- Three criteria for the definition of regions: physical proximity and separateness, interdependence and homogeneity.
2- A region is a zone where there is a high density of economic transactions relative to other units. If regions have boundaries, these boundaries are usually vast gray areas that vary in tones and shades rather than black and white.
3- Third criterion for identifying region is homogeneity, such as of similarity of values, of economic systems, of political systems, of way of life, of level of economic development.
Some see regional integration as a gradual process starting from free trade and moving through customs union, common market, economic union to full economic integration.
NAFTA has an institutional basis for dispute settlement. Chapter 20 of NAFTA sets forth a generally applicable procedure for dispute settlement, in which the third party’s ruling is non-binding. MERCOSUR has a provision for arbitration by a specially constituted tribunal or expert panel under the Brasilia Protocol of 1991 that makes binding rulings on disputes.
Jean Monnet argued that individuals and groups, engaged in practical problem-solving across borders, provided the push (demand side) for regional integration. Without this demand side, regional integration could not succeed.
Functionalism represents a type of social pluralism, it points to society as the engine of politics.
The second principle: a well-developed demand side is necessary for integration, but it is not sufficient. Without political mechanisms to provide leadership, aggregate interests and convert them into policy, even the most intense interests may not lead to policy consequences.
Functionalism has three components: background conditions, process conditions and conditions that are likely to encourage or discourage task expansion.
Neofunctionalism argued that integration was most likely to emerge first among countries with a certain type of domestic environment: liberal democratic countries with advanced capitalist economies differentiated social structures, and highly pluralistic interest group structures. In these societies, class conflicts were to be muted, ethnic rivalries less intense, and warfare an obsolescent institution.
As economic exchange goes up, so too will the demand for common rules and rule-adjudication. Since main obstacle to regional integration is the differences among the rules and norms at national level, it follows that political integration implies either eliminating these discrepancies or finding some other principle to coordinate the difference.
Movement toward higher levels of institutionalization comes from the constant pressure exerted by the conflicts surrounding economic exchange and the ongoing arbitrage resulting from the attempts to devise rules as well as to escape them.
Sandholtz argues that interests of social actors, as well as negotiating positions adopted by states, are affected not only by economic facts but also by the experience of membership in the international institutions itself.
The problem of neofunctionalism is that the construction of interests and the role they play in regional integration is not clear.
Realist Approach
Realist theory argues that the preferences (including preferences for integration) are determined by their position in the international system, that is, their position within the international distribution of power.
When states join a regional union, they presumably commit to cooperation with a stable membership over a long period of time. Durable membership with the same partners focused on mutual absolute gains implies the antithesis of realist expectations (frequently changing allies based on shifts of power and preoccupation with relative gains).
Anarchy produces distrust and makes each country vulnerable to the deceits of others. Since economic exchange can make one’s partners stronger in their military capacity, trade takes place only at severe risk to one’s security, since one country may gain more than another or may deploy its share of gains from trade for security purposes.
Yet anarchy by itself is not sufficient in explaining why some countries integrate regionally and others do not. Anarchy cannot explain variations in cooperative exchange or why some countries are absorbed by a fixation on relative gains while others pursue absolute gains.
Grieco’s argument is that countries (particularly the ‘secondary states’ that are weaker but still influential partners) bargain to increase their influence by binding powerful members into international institutions and policies. He calls this ‘voice opportunity thesis’, reflecting the political influence that state try to exert to enhance their role in international organizations, and to decrease and manage the burdens coming from being part of an interconnected market with larger countries.
Liberal Intergovernmentalism
Liberal intergovernmentalism places states at the center of analysis. This is not to say that interest groups are unimportant. However, the force of these groups is felt as part of a causal chain in which economic and social interests are funneled through the domestic political process and are affected by domestic institutions.
Moravcsik lays out a two-step process of preference formation and bargaining  which he extends to a three-step process: preference-formation, intergovernmental bargaining and institutional lock-in of bargains.
Identical constellations of interests can produce very different results in terms of political outcomes. The political system is not simply an adding machine that translates economic demands into political results. Procedures for aggregating interests vary considerably from country to country.
This theory provides a more sophisticated theory of preference formation than neofunctionalism. This theory is based in part on the logic of collective action and the new institutionalism. The introduction of states, representing both their own institutional interests as well as the interests of their constituents, provides a more accurate picture of regional integration than one exclusively based on social forces and supranational entrepreneurs.
Day to day politics in regional organizations is about procedural manipulation or the choice of rules, rather than bargaining over grand constitutional structures.
Constructivist Approach
Checkel argues that ideas, norms and identities are important but not just external constraints. Norms, then, are simply constraints that agents run up against when they make choices. For him, norms can become constitutive of agents, part of who they are, and deeply internalized. When this occurs, the overall interpretation changes from one based on conscious adjustment to changing costs to one based on enactment of values.
Checkel looks for testable implications of the constructivist approach.
1) The effects of changing costs and benefits at the margins should be less than is generally assumed in utilitarian theories.
2) Compliance with European rules should be less responsive to changing sanctions and benefits of going alone and more to deep institutional factors, such as the conception of a country of itself as a rule-of-law country, one that lives according to rules regardless of whether they agree with them. (example is UK)
3) constructivism implies endogenous preferences, not just to the economy but also to political institutions and social interaction that take place in international contexts.
France, Germany and UK have different European identities, but these identities may change over time.
Constructivism made several contributions:
1) Provided a missing link between objective material factors and outcomes. 
2) It allows us to better understand the ‘how’ part of the integration process as well as ‘what’ and ‘why’ dimensions. For example, how EMU got adopted.
3) It provides a point of convergence with rational choice analysis. By probing deeper into the content of shared ideas and norms, there is a stronger foundation for focal point analysis which figures prominently in rational choice theory.
Constructivist approach needs to better identify what a logic of appropriateness is. It is often posited as a stark alternative to a logic of consequences.
Multi-level Governance
The main idea is that neither the EU nor the member states nor some other political entity, enjoys a monopoly of power and decision-making competence in the EU. The EU along with the states and subnational regions are best seen as part of a complex system of multi-level governance interacting in numerous ways with one another and with private actors.
To understand the EU one has to take seriously into account levels below and above states. This is especially true with regard to issues such as regional policies, but it is also the case for regulatory and distributive issue areas.
In contrast to a state-centric model that sees social influences as funneled through the state, interest groups may outflank the state and go directly to Brussels.
Political arenas and economic actors are interconnected but not necessarily nested.
There are two major challenges to multi-level governance approach:
1) There is a need to come up with a conception of causality that is not dependent on ‘where’ some activity takes place. The geographical site of activity is taken to be direct evidence for causality. Something happens in Brussels is not proof of the causal importance of institutions headquartered here.
2) There is a need to move from a specification of actors to core research problematics.
Political Institutionalism
The construction of rules of governance is an elementary component of international transactions. One of the obvious empirical differences among East Asia, Western Europe and North America lies in their different degrees of institutionalizations. In terms of comprehensiveness of scope, the EU far exceeds institutionalization in North America and East Asia. Why?
a) Economic integration is high in all three areas, so we cannot say that institutionalization necessarily follows from high levels of economic exchange, nor by the externalities created by such exchange.
b) Each area has a hegemonic core. If institutionalization is the result of leadership in the pursuit of public goods, then North America and East Asia should also have high levels of institutionalization.
Germany, a leader in the process of EU integration, thoroughly renounced nationalism after the WWII and saw European integration as the only viable path toward reincorporation into the international system. This was not the case in North America and East Asia where the U.S and Japan held on to a much more nationalistic conception of their place in the world.
The puzzle as to why Germany accepted EMU when it was de facto the leader of European monetary policy is usually resolved by pointing out that Kohl wanted to pacify his European neighbors, to appease their fears that a reunified Germany would pose no threat to Europe. A similar downplaying of national sovereignty cannot be expected in East Asia.
Many scholars claim that regional institutions in East Asia are informal, soft (less binding) and open (non-discriminatory), unlike those in Europe and North America. The avoidance of legalization in East Asia (and the pacific) is largely ascribed to the unique Asian culture based on harmony and consensus.