Economic Integration as a Means for Promoting Regional Political Stability:
Lessons from the European Union and MERCOSUR
By Thomas Andrew O’Keefe, Esq.*
breakup of the former
Although the widespread atrocities directed against civilian populations are still _________________________________________
*The author is President of Washington, D.C. based Mercosur Consulting Group, Ltd. [http://www.mercosurconsulting.net] and teaches courses on Western Hemisphere economic integration at The George Washington University’s Elliott School of International Affairs and Johns Hopkins University’s School of Advanced International Studies.
fresh in the memories of many
living within the territory of the former
Perhaps most importantly, promoting an effective project to economically integrate the countries of the Balkans offers a more a realistic way to resolve Kosovo’s current limbo status as a de facto independent entity that is formally under Serb sovereignty yet administered by the UN. If the example of the EU is taken as a model, a fully functioning Balkans economic union would mean greater economic and political autonomy for Kosovo regardless if, under international law, it technically remained under Serb sovereignty (albeit in the form of a loose confederation). Even if the option of full independence is pursued, an economically integrated Balkans enhances Kosovo’s ability to prosper. An integrated Balkans also allows Kosovo to stand on its own feet economically without incorporation into a Greater Albania, whose creation could well plunge the Balkans into renewed conflict.
This paper examines the experiences of the EU and MERCOSUR integration projects that have led to permanent peaceful relations among the participating countries, and contributed to overcoming historically bitter rivalries and conflicts. In particular, the paper attempts to focus on lessons that can be gleamed from these two economic integration projects that may be relevant for any effort to integrate the Balkan countries (including, perhaps, the eventual establishment of some form of political union). Examining the EU experience with regionalism is especially relevant to any discussion of Kosovo’s final status, since it may provide a pertinent model for ensuring Kosovo’s future economic viability, territorial and cultural integrity, and avoid the outbreak of another war in the Balkans.
The Origins of the European Union as a Response to the Carnage of WW II & Its Ultimate Goal of Political Union
The idea of a formal political union in Europe
flourished in the waning days of the Second World War and in the immediate
post-war period. In
At a conference of the main European federalist
organizations at The Hague in May 1948, a proposal for a European Parliament
was rejected in favor of the idea of the Council of Europe, with a Council
of Ministers and a Consultative Assembly nominated by the national governments.
This weak, consultative body, which was largely the result of British objections
to the loss of sovereign power that a European Parliament presumably entailed,
was set up at Strasbourg in 1949. This modest result was a disappointment for the
federalists, who never again reached the same degree of influence with European
governments. From now on, the locus of European integration switched to
the economic and military sectors. This does not mean, however, that the vision of
eventual political union was abandoned. It is just that more pragmatic advocates
of a Federal Europe such as Jean Monnet of
Interestingly, from June 1948 onwards the operation of Marshall aid became an important pillar supporting efforts at western European economic integration.  In 1949, the Economic Cooperation Administration (which oversaw implementation of the Marshall Plan) adopted economic integration in Europe as a central policy.  In order to facilitate intra-regional trade, the European Payments Union was founded as a central clearing house mechanism on July 1, 1950 to overcome previous problems associated with restrictive national monetary exchange controls.
On May 9, 1950 then French Foreign Minister Robert
Schuman, proposed the integration of coal and steel production in Europe
under the control of a “common high authority”. The
coal and steel plan, which included the creation of a body with supranational
authority, was deemed by its French proponents as a route towards European
cooperation on a broader scale. The plan sought to integrate the production and
exchange of iron and steel products between
The European Coal and Steel Community
(ECSC) was formally established in August 1952 on the basis of the Treaty
of Paris, which had been signed in April 1951. The economic success of the ECSC, which had
a partial Common External Tariff (CET), suggested that a broader customs
union might be the ideal vehicle for achieving European integration. Equally as important, the ECSC began the process
In late 1954, the six governments that made up the ECSC began to consider a new economic initiative that would complement their original coal and steel pact. These discussions eventually led to the March 1957 signing of the Treaties of Rome instituting Euratom (i.e., the European Atomic Energy Commission) and the European Economic Community (EEC). The latter sought to establish a customs union among the initial six participating states, develop common policies on transport and agriculture, as well as prohibit monopolies and assist less well-off regions through a Social Fund and Investment Bank. The creators of the Treaty of Rome were not, however, primarily motivated in establishing an economic union. Instead, they saw economic integration as a step towards political union, the hope being that political unity would eventually evolve out of closer economic cooperation.
The end of military dictatorships in
The Growing Importance of the Regions within the European Union
Although not officially recognized as partners in the founding treaties of the European Community, regional authorities throughout the EU have, since the early 1980’s, become increasingly involved in first the EEC and now EU policy process. This change has been accompanied by the emergence of an increasingly assertive ‘regional lobby’ in Brussels and growing support for a ‘Europe of the regions’. Part of the explanation for this development can be traced to the ratification of the 1992 Treaty of Maastricht and its underlying general principle of “subsidiarity”. Those of a more federalist disposition have used subsidiarity to argue not only for more Community action but also for greater participation by the regions of member states in EU rulemaking. In short, European integration has prompted the emergence of new regional groupings, networks and processes which transcend the territorial and legal parameters of ‘old’ regions defined by the nation-state.
The increasing importance given to
regional authorities by the EU in terms of formulating and implementing overall
policy and legislation helps to explain another interesting phenomenon. Among
the biggest supporters of the EU are ethnic groups or inhabitants of nations
long subsumed into larger states but still resentful of central rule from
that country’s capital. With Brussels increasingly the locus of rule-making
power and a source of generous economic aid (coupled with monetary policy
being set for most by the European Central Bank in Frankfurt), the traditional
stranglehold exerted by central governments on regional cultural and economic
development has diminished. Accordingly, this phenomenon allows regions
to peacefully “break out” of their nation-states without necessarily suffering
any economic penalty or risking bloodshed. For example, an increased voice
for Catalonia in the EU makes demands for independence from
An Historic Overview of Relations Between
much of the colonial period, the River Plate Basin of South America was
at the front line of the competing imperial interests of
Formal independence from Spain in 1816 of the United
Provinces of the River Plate (which technically included Paraguay and Uruguay
and what is today the Argentine Republic) did not end the territorial disputes
in the region as the new Brazilian Empire (itself an outgrowth of the Portuguese
royal family’s forced sojourn in Rio de Janeiro during the Napoleonic conquest
of the Iberian peninsula) eventually annexed Uruguay in 1820. In 1825,
the Uruguayans rebelled against their Brazilian overlords and sought to
re-establish a federation with
Peace in the River Plate region was again interrupted
in 1864 as a result of the War of the Triple Alliance. Alarmed by what
he perceived to be Argentine and Brazilian interference in the internal
affairs of Uruguay (and a possible attempt by both to dismember the country),
then Paraguayan strongman Francisco Solano López issued strident declarations
throughout 1864 in support of the embattled Blanco Party President in Montevideo.
When the Brazilians actually invaded Uruguay in September of 1864, Paraguay
sent troops to capture the interior Brazilian province of Mato Grosso and
seized a Brazilian river boat (whose passengers included the governor of
Mato Grosso) passing through its territory. In March of 1865
their alliance in the war against
War II exacerbated tensions in Argentine-Brazilian relations, as
the conclusion of WWII,
In 1948 Argentina
and Brazil signed an agreement in which each country agreed to use the Brazilian cruzeiro as
the common currency in their bilateral trade, favor each others’ shipping
lines, and set up a commission to investigate constructing a hydroelectric
dam at Iguaçu from which Argentina could harness electric power. Peron's attempts to garner closer commercial
During the administration
of Brazilian President Juscelino Kubitschek (1956-60), the arguments of a
newer and generally younger group of foreign policy technocrats in
In April of 1961 then Presidents
Frondizi of Argentina and Janio Quadros of
The strong anti-communism
of the new Argentine and Brazilian military rulers that overthrew Frondizi
and Goulart, respectively, initially united
On April 26, 1973
As the 1970’s drew to a close,
The 1980’s Rapprochement Between
Between May 14 and May 17, 1980,
then Brazilian President General João Bautista Figueiredo visited Buenos
Aires at the invitation of his Argentine counterpart, General Jorge Videla.
at closer economic integration between
The 1982 Argentine defeat by
the British in the South Atlantic generated considerable introspection in
Argentina and caused the Brazilian military to rethink their premises about
Argentina as a serious military threat or a country likely to engage in any
future military adventures. As
a result of the Malvinas fiasco, a new concept of national security began
to emerge in both
During a ceremony in November
of 1985 to inaugurate a new bridge near Iguaçu Falls connecting
Through the PICAB,
In November of 1998, Presidents Alfonsin and Sarney met in Buenos Aires to sign a Treaty of Integration and Economic Cooperation (which came into effect the following year after it was ratified unanimously in both the Argentine and Brazilian Congresses). The Treaty committed both countries to begin taking steps that would gradually culminate in an Argentine-Brazilian common market by 1999. Although both countries were wracked by severe economic crises at the time, forging closer Argentine-Brazilian economic links made good political sense since the PICAB was one of the few policy initiatives that had produced any positive results.
In order to demonstrate just how close Argentine-Brazilian relations had become as a result of the PICAB, President Sarney visited a top secret Argentine nuclear research station in Ezeiza following the signing ceremony for the Treaty of Integration and Economic Cooperation. Further evidence was provided by the fact that the Argentine or the Brazilian armies no longer used the other country as a potential enemy when conducting war games. As a result of these mutual changes in attitude, Presidents Alfonsin and Sarney were able to sign Protocol 23 to the PICAB in November 1988, thereby permitting factories to be built along their respective common borders. Prior to this time, traditional national security concerns in both countries had dictated that development should be directed at a safe distance from the Argentine-Brazilian border and potential enemy artillery. These traditional military concerns also explained why before the 1990’s, Argentine roads and bridges near the Brazilian border were purposely constructed so as not to withstand the weight of an invading Brazilian tank and neither country utilized the same railroad gauge.
How the Appearance of MERCOSUR Has Permanently Transformed the Political Landscape of South America’s Southern Cone
6, 1990, then Argentine President Carlos Menem (1989-99) and Brazilian President Fernando
Collor de Mello (1990-92) signed the Act of Buenos Aires. The Act called
for the creation of an Argentine-Brazilian common market by 1995, instead
of the 1999 date targeted by both their predecessors. The actual rules
for eliminating duties and non-tariff barriers between
The Treaty of Asuncion sought to have a free trade area in place among all four countries and a Common External Tariff (CET) established for goods imported from the outside world by 1995. In actuality, the free trade area took some years longer to fully implement than originally contemplated, but today only sugar is still excluded from intra-regional free trade. Similarly, while a CET was established by January 1, 1995, it only applied to about 85 percent of the tariff lines found on MERCOSUR’s harmonized tariff schedule. Subsequent economic crises and preferential trade arrangements not encompassing all four countries created additional perforations to the CET. It is now expected that MERCOSUR’s CET will not be fully operational until 2010.
As tariffs among the MERCOSUR countries were gradually eliminated throughout the 1990’s, intra-regional trade exploded, nearly quadrupling to U.S.$ 20 billion by 1998 over the level recorded in 1990. Interestingly, this dramatic growth in intra-MERCOSUR trade also came at a time when MERCOSUR’s exports to the rest of the world were also increasing. Subsequent economic crises, beginning with the maxi-devaluation of the Brazilian real in January 1999, wreaked havoc on intra-MERCOSUR trade flows (including a significant contraction in 2002). Despite these setbacks, none of the MERCOSUR governments has reversed course and abandoned the integration process. Following his landslide October 2002 election and before he was even inaugurated, Brazilian President Luiz Inácio Lula da Silva visited Argentina and Chile to underscore the importance he attached to MERCOSUR as a means of restoring economic growth and stability to the region. Joining him in that vision was Nestor Kirchner, who became President of Argentina in May 2003, and Nicanor Duarte Frutos, who assumed the Paraguayan presidency on August 15, 2003.
MERCOSUR is today a political
and economic reality that, among other things, supports democracy in South
America’s Southern Cone. For example, in 1996 the MERCOSUR governments prevented
a military coup d’etat in
MERCOSUR has also served as a catalyst for hundreds of cross-border investments within the sub-region, a phenomenon virtually unknown prior to the 1990’s and necessary to create internationally competitive sub-regional firms. Furthermore, MERCOSUR has widened the scope and deepened the level of intra-regional relations through regional infrastructure initiatives, cooperative agendas in education and culture, and heightened interaction among political actors of the member states.
More recently, MERCOSUR has
proven itself an effective counterweight to
Is An Economically Integrated Balkans Feasible?
The idea of economically integrating
the Balkans through the creation of a free trade area or customs union or
an even more ambitious economic union is neither far fetched nor an historical
anomaly. Balkan federation schemes, which consisted of
various combinations among
The pressing need exhibited by Kosovo
and most countries that formally made up
In the particular case of Kosovo, resolution of its final status and the elimination of tariffs on intra-Balkan trade would create opportunities for sustained economic growth. At the same time, however, it must also be acknowledged that one thing that could undermine any effort to economically integrate the Balkans is the heavy dependence by some governments on the revenue collected from import duties. Kosovo is said to be especially dependent on revenue generated through import tariffs. Accordingly, any attempt to liberalize intra-regional trade will require temporary financial assistance for governments like Kosovo as they scramble to find new revenue streams generated from the economic growth that regional free trade will likely bring.
Ernest Haas and Philippe Schmitter, two well known neo-functionalist political theorists have identified five conditions which give strength to the economic integration process and enhance its integrative potential. The first of these holds that a region is more likely to develop a viable plan if no units within the proposed union present an overpowering presence in size and power vis-à-vis other units. The second posits that the more pre-existing integration or mutual interdependence there is before integration, the greater the proposed union’s integrative potential. The third condition listed by Haas and Schmitter is the extent to which each country exhibits a pluralistic socio-political structure. The expectation is that the greater the level of democratic pluralism, the greater the project’s potential for success. The fourth condition is based on the degree of complementation of elite values (i.e., the opinions of political and business leaders, intellectuals, and pundits) within the proposed union. Finally, the level of actual or perceived external dependence can give strength to the integration process. In this context, it is important to examine the environment of world politics in which a regional integration process is being carried out because historically unique factors can serve as an important catalyst for initiating or furthering the process along.
KEY SOCIO-ECONOMIC INDICATORS OF THE BALKAN REGION*
GDP (in billions of
Per Capita GDP (in
*Population figures are 2003 estimates. Remaining Statistics (except Kosovo) are based on 2002 Data.
Source: The CIA World Fact Book for 2003 & Kosovo Provisional Institution for Self Government
Using Haas and Schmitter’s criteria,
it would appear that economically integrating the Balkans, particularly the
former Republics of Yugoslavia,
For Haas and Schmitter’s second condition,
the economies of the former republics of
More problematic in predicting the future viability of an economically integrated Balkans lies in fulfillment of Haas and Schmitter’s third variable. Many of the former Yugoslav republics still do not have fully pluralistic socio-political structures, especially when it comes to respecting the rights of certain ethnic minorities. This deficiency has also slowed their accession into the EU, which requires compliance with the so-called Copenhagen criteria of liberal democracy and respect for human rights. However, given that all these countries are now firmly embarked in constructing representative democracies, it does not seem implausible that they will be able to achieve fuller pluralism sometime in the near future.
A question mark also exists with respect
to meeting Haas and Schmitter’s fourth condition concerning regional complementation
of elite values. Although there are indications of momentum building in favor
of a “Balkans without Borders”, it is still unclear just how pervasive support
for such a concept is among elected leaders and other opinion makers in the
region. This is particularly true in those countries (such as
As for Haas and Schmitter’s fifth condition, all the Balkan countries identified as candidates for the proposed Southeastern European Balkan economic integration project are highly dependent on outside capital for development and, in some cases, survive only because of foreign donor relief money and remittances from nationals living abroad. Accordingly, this situation facilitates integrating the Balkans, albeit not necessarily in the way foreseen by Hass and Schmitter (e.g., to reduce dependence on one dominant trading partner, etc.). Instead this high dependence can be used by foreign economic powers to steer the Balkan countries towards greater economic integration, particularly if accompanied by important carrots such as generous development aid money or as a pre-condition for joining the EU.
Although it is true that on at least two conditions
(i.e., power-size homogeneity and pre-existing integration or mutual
interdependency) Romania is the odd man out, the inclusion of Romania in
any proposed Balkan integration scheme might be beneficial from a Kosovar
perspective given that Romania’s 22.3 million mostly non-Slavic inhabitants
could serve as a counterweight to the 25 or so million Slavs from the other
Balkan states. Without the presence of the Romanians, both
the EU and MERCOSUR integration projects provide valuable lessons for any
effort to economically integrate the Balkans. Perhaps the most important
is that successful economic integration can be used as a way to permanently
banish the specter of war and inevitable conflict among those countries participating
in any such process. However, it is important to emphasize that for this
to happen the economic integration projects must also remain dynamic and
offer tangible opportunities, such as increased trade flows and/or growth
in cross-border investment. Just as Latin America offers MERCOSUR as a successful
example of integration (especially in the political sphere) there are other
Latin American projects that were unable to prevent war among their members. For
example, in 1969 war broke out between
Both the EU and MERCOSUR also provide evidence for the proposition that regional economic integration provides a way to strengthen weak democracies by requiring liberal democracy and respect for human rights as a condition for initial entry and continued access to the benefits provided by membership. Furthermore, the EU experience with subsidiarity and supranational bodies indicates that spaces can be created for long suppressed national subgroups to develop culturally and politically in a fairly autonomous fashion with minimal economic disruption or bloodshed.
the Kosovar perspective, the exact form of economic integration any Balkans
project pursues depends, to a large degree, on final determination of Kosovo’s
status under international law. If full independence is pursued, a free
trade area would probably make most sense since Kosovo would retain sovereignty
to set its own tariff policy on non-regional imports and collect any duty
revenue for its own purposes. On the other hand, opting for a loose confederation
Whatever form of economic integration the Balkan countries adopt, this decision in and of itself should not impede their eventual accession into the EU. For example, the three Benelux countries were incorporated into the old EEC as an already existing customs union. The EU has also not been adverse to allowing large numbers of countries to join the block at one time, as evidenced by the 10 new countries became members in May 2004. If anything, a deeper form of Balkan integration could facilitate incorporation of the whole sub-region en masse since the EU would be dealing with an already established and cohesive economic unit and would need to make only one tariff offer to the whole block and not to several countries. This is one important lesson from the current negotiations to create a EU-MERCOSUR free trade area, where it is the EU as much as MERCOSUR that wants to negotiate bloc to bloc. In addition, the carrot of EU accession provides an important incentive to prevent backsliding on strengthening representative democracy, respect for human rights, and economic reform.
Dated: Washington, D.C.
April 22, 2004
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 A. Sutcliffe, AN ECONOMIC AND SOCIAL HISTORY OF WESTERN EUROPE SINCE 1945 (1996), at 106.
 Id. The
joint declaration described federation as the only means of European survival
and the only method through which
 Sutcliffe, supra note 1, at 106.
 Id. at
107. British opposition is ironic given that in June 1940, the British government,
eager to keep its stricken French ally in WW II, agreed to unite
 Id. at 107.
 Id. at 110.
 Id. at
108. Already in January 1947, then
 Sutcliffe, supra note
1, at 109. Until the idea was rejected by the British, the
 Schmitt, supra note 2, at 25. To the deficit or surplus which any of the 16 countries that made up the Organization for European Economic Cooperation (OEEC) might have acquired in a bilateral trade partnership, would be added the balances (negative or positive) with the remaining OEEC associates. If the final sum showed a surplus, the Union would be the debtor. If the reverse turned out to be the case, the country in question would owe the Union. Id. at 26.
 Sutcliffe, supra note 1, at 110. The intellectual author of the proposed European Coal and Steel Community was Jean Monnet who, as previously noted, was the French Minister who proposed to Churchill the union of France and Great Union on the eve of WWII.
 Id. at 111. Integration entrusted to a supranational body independent of national supervision was at the heart of Monnet’s thinking. The birth and history of the Council of Europe had demonstrated to him that no government in Europe was ready to abdicate sovereignty in the political sphere. Accordingly, cooperation in the coal and steel sectors might prove a less sensitive area to experiment with the concept of supranationality without incurring immediate opposition. Schmitt, supra note 2, at 59.
 Sutcliffe, supra note 1, at 111.
 Id. at
111. The basic idea was that by integrating the steel industry, through the
use of coal obtained in
underlying premise for the ECSC was that ‘[p]ermanent free trade’ could not
be ‘attained without the transfer of powers to supranational authority’.
Schmitt, supra note 2, at 88. The creation of the ECSC had the support
 Sutcliffe, supra note 1, at 116. The ECSC had a significant impact upon the provision of housing in the coal and steel regions; it helped to reduce discrimination in freight rates; and it served as the catalyst for an increase in intra-ECSC trade which far outstripped increased production and trade with other states. Stirk & Weigall, supra note 8, at 72.
 Id. at 72.
 Id. at 125.
 See, e.g., Sutcliffe, supra note 1, at 116 and Stirk & Weigall, supra note 8, at 124. Behind the arrangements on trade there was an implicit political agenda. With the customs union and, more far reaching, the creation of common policies or the progressive coordination of national policies, the Community would produce ‘closer relations between the Member States’. Id. at 130.
 Id. at 249.
 S. Mazey, Regional Lobbying in the New Europe, in THE REGIONS AND THE NEW EUROPE: PATTERNS IN CORE AND PERIPHERY DEVELOPMENT (M. Rhodes, ed. 1995), at 78. Undoubtedly, the EU’s regional policy and the associated structural funds have also played an important catalytic role in the development of a regional lobby. Id. at p. 83.
 Pursuant to Article 3b of the Treaty of Maastricht “In areas which do not fall within its exclusive competence, the Community shall take action, in accordance with the principle of subsidiarity, only and if in so far as the objectives of the proposed action cannot be sufficiently achieved by the Member States and can therefore, by reason of the scale or effects of the proposed action, be better achieved by the Community.” The Treaty of Maastricht, which formally brought the EU into existence in 1993, also established a Committee of the Regions as an advisory body to be consulted by the European Commission or the European Council.
 Stirk & Weigall, supra note 8, at 277. Particularly, since the 1992 single market program, regional authorities have become increasingly subject to and responsible for implementing EU legislation. They have, therefore, repeatedly argued that they should be involved in the formulation of European policies. Mazey, supra note 20, at 81.
 Id. at
80. One, however, should be cautious of how far the EU is willing to go
in overtly encouraging regionalist ambitions, for fear of antagonizing powerful
member governments. For example, efforts by Catalonia,
 Id. at
51. The article notes that visitors to the office of John Swinney, head of
the Scottish Nationalist Party, find two flags prominently displayed,
See, e.g., Devolution: The Choice for Scotland and Wales, THE ECONOMIST, Sept. 6, 1997, at 56-8 and Devolution Can Be Salvation, THE ECONOMIST, Sept. 20, 1997, at 53-54.
 Stanley A. Hinton, The Argentine Factor in Twentieth Century Brazilian Foreign Policy Strategy, 100 POLITICAL SCIENCE QUARTERLY 28 (Spring 1985).
 Id. Divergent policies during World War I---Brazil joined the allies while Argentina remained neutral—resuscitated fears of a military confrontation, which were subsequently fueled by diplomatic clashes, Argentine military preparations, and the volatile Chaco territorial dispute that eventually erupted into a war between Bolivia and Paraguay from 1932 until 1935. Id. at 29.
 One of the leaders of the 1943 coup was Juan Domingo Peron who used his position, first as head of the National Labor Department and then at the newly created Secretariat of Labor and Social Welfare, to build a power base among the Argentine working class that would eventually allow him to run for and win the presidential elections of 1946. Peron was re-elected under less than stellar democratic conditions in 1951, and was unable to finish his second term as a result of a military coup in 1955.
 Id. at 31.
 L. Bandeira Moniz, O EIXO ARGENTINA-BRASIL: O PROCESSO DE INTEGRACAO DE AMÉRICA LATINA (1987), at 34.
 Id., at 26.
 Id. At 28.
 Illustrative of these fears was the secret session of the Brazilian
Congress called on June 10, 1947 to
discuss accusations made by an influential congressman that
 Bandeira Moniz, supra note 31, at 29.
 Inaugurada Ontem o Ponte Internacional Sobre o Rio Uruguai Pelos Presidentes da Republica do Brasil e da Argentina, O ESTADO DE SÃO PAULO, May 22, 1947, at 1.
 Hinton, supra note 27, at 39.
 Bandeira Moniz, supra note 31, at 38.
 Id. at 39.
 Id. at 41 & 46-7. During the late 1960’s and early 1970’s the Brazilian economy experienced an “economic miracle” of annual double-digit growth in GDP.
 Id. at 49.
 Leonel Itausu Almeida Mello, Brasil, Argentina e a Balanca de Poder Regional: Equilibrio, Preponderancia ou Hegemonia? (1969-86). (unpublished thesis, Universidade de São Paulo, 1991), at 129.
Brazilian action, in effect, nullified a treaty that the country had signed
in 1969 with
 For example, in 1971 the Brazilians financially underwrote Hugo Banzer's
overthrow of the leftist General Juan José Torres in
 Id. at
60. This explains the widespread sense of alarm generated
by a December 1971 remark made by then U.S. President Richard M. Nixon during
a welcoming ceremony at the White House for Brazilian President General Emilio
Medici "that as
Wayne A. Selcher, Current Dynamics and Future Prospects of Brazil’s Relations with Latin America: Toward a Pattern of Bilateral Cooperation, 28 J. OF INTER-AMERICAN & WORLD AFFAIRS 69 (Summer 1986). By the late 1970s and until 1982 South American markets had become the most dynamic in the world for Brazilian exports, representing 18.1% and 19.3% of total Brazilian exports for 1980 and 1981 respectively (shares larger than those absorbed by the United States). Id. at 81.
 By this treaty the signatory states pledged themselves to promote the rational occupation and economic development of the Amazon region as well as to encourage the economic and social integration of the eight signatory states.
 Los Vinculos de Brasil con el Grupo Andino, LA NACIÓN, Oct. 17, 1979, at 2.
 As a result of the Tripartite Agreement,
 Itaussu Almeida Mello, supra note 43 , at 131.
 Meta é Criar
Bases Politicas e Juridicas, JORNAL DO BRASIL,
May 18, 1980, at 22. In particular, both countries
agreed to share hydroelectric power obtained from the Uruguay River and
its tributaries, interconnect the two countries' electrical systems,
build a military plane together, eliminate effects of double taxation,
construct a second bridge to link the two nations by road at Iguaçu,.
 Delfim Anuncia Criação de Comissão Bilateral, JORNAL DO BRASIL, May 16, 1980, at 4. In August of 1980, General Videla travelled to Brasilia where he and Figueiredo signed seven additional agreements, including additional protocols to the nuclear pact of the previous May.
Emb. Francisco Thompson Flores Neto, INTEGRACÃO E COOPERACÃO BRASIL-ARGENTINA (1991), at 5.
 The Argentine leaders apparently believed
that by tying themselves closer to the major power in the Western Hemisphere, the
Wayne A. Selcher, Brazilian-Argentine Relations in the 1980s: From Wary Rivalry to Friendly Competition, 27 J. OF INTER-AMERICAN STUDIES AND WORLD AFFAIRS 30 (Summer 1985).
Id. At 35.
 Oscar Camilion, La Evaluación Argentina, in ARGENTINA-BRASIL: EL LARGO CAMINO DE LA INTEGRACIÓN (M. Hirst, ed. 1989), at 157.
 Neantro Saavedra-Rivano, A Integração Econômica Brasileira-Argentina no Contexto da Cooperação Econômica Sul-Sul, in BRASIL-ARGENTINA-URUGUAI: A INTEGRACÃO EM DEBATE (R. Baumann Neves, ed., 1987), at 71.
 T. Vigevani, RELACÕES EXTERIORES DO BRASIL;MERCOSUL E OS INTERESSES
POLÍTICOS E SOCIAS (1991), at 5. Throughout the late 1980’s, as the PICAB was implemented, trade between
retired Brazilian vice-admiral attending a Buenos Aires symposium sponsored
by the general staffs of the Argentine and Brazilian Armed Forces in April
1987 credited the PICAB with giving each country’s military a “new horizon”. At
this same symposium, the construction of a binational nuclear submarine was
proposed. See, Military Affairs: Proposals for Closer Ties with
based in Montevideo,
 For a more detailed description of the recent trials and tribulations facing MERCOSUR and how they have gradually been overcome, see T.A. O’Keefe, A Resurgent MERCOSUR: Confronting Economic Crises and Negotiating Trade Agreements 60 NORTH-SOUTH CENTER AGENDA PAPER (January 2003) available through the Web at: <http://www.miami.edu/nsc/publications/pub-ap-pdf/60AP.pdf>
e.g., Pedro da Motta Veiga,
Hirst, Mercosur’s Complex Political Agenda in MERCOSUR: REGIONAL INTEGRATION,
WORLD MARKETS (R. Roett, ed., 1999), at 43. Hirst notes that besides these
initiatives at the local and federal levels, cross-border interaction has
been intense among business sectors, social organizations, and political
elites, and inter-provincial networking is a reality between the southern
 In his seminal work on the subject matter, Bela Balassa identified five basic forms that economic integration can take. The first and least complicated consists of the creation of a free trade area in which tariffs and quantitative restrictions are eliminated on trade between participating countries, although each nation retains its tariff structure as against non-participants. A customs union adds to the free trade area the equalization of tariffs by participating states against imports from non-members (i.e., the implementation of a Common External Tariff or CET). A common market includes free trade in commodities among participating states, a CET, as well as the elimination of restrictions on the free movement of factors of production (i.e., labor and capital) among the member states. An economic union adds to the common market framework some degree of harmonization of national economic policies in order to remove discrimination that was due to previous disparities among participating states in these policies (e.g., the creation of a Central Bank with some supranational powers). Finally, total economic integration presupposes the unification of monetary, fiscal, social, and counter-cyclical policies and requires the establishment of a supranational authority whose decisions are binding on all the member states (i.e., in essence the establishment of a political federation). See, B. Balassa, THE THEORY OF ECONOMIC INTEGRATION (1962), at 2.
 J. M. van Brabant, ECONOMIC INTEGRATION IN EASTERN EUROPE: A HANDBOOK (1989), at 12.
 Stirk & Weigall, supra note 8, at 36.
 Id. at 186. Romania’s opposition appears to have been premised, in part, on a long tradition of protectionism dating back to the 19th century, as well as a feeling that an ambitious integration project that included ceding sovereignty to a supranational body was incompatible with the concept of a socialist state and the need to foster the development of an industrial proletariat through the promotion of heavy industry. Id. at 184-85 & 187-88.
 Three schools of political theories of economic integration exist. The federalist approach (now largely discredited) which emphasizes the role of institutions; the transactional approach (considered outdated) which stresses transactions between people; and the neo-functionalist approach which focuses on the ways in which supranational institutions emerge from a convergence of interests of various significant groups in society. See, A. Puyana de Palacios, ECONOMIC INTEGRATION AMONG UNEQUAL PARTNERS (1982), at p. XXI.
 William P. Avery & James W. Cochrane, Innovation in Latin American Regionalism: The Andean Common Market, 27 INT’L ORGANIZATION 207 (Spring 1973). This view of relative power-size homogeneity has been attacked by others who argue that “core areas” within a proposed union can provide a centripetal force or locomotive effect that initially helps push the integration process forward.
 Id. at 215. The fact that the advantages and drawbacks of an integration process can be openly debated should mean that any final decision to proceed with such a project has strong societal support that will help overcome temporary setbacks that may appear on the road to economic integration.
general, the greater the complementation of opinion among elites with effective
power over economic policy as reflected in similar statements and policies
towards the most salient political-economic issues in the region, the better
the conditions for positive integrative responses. Joseph S. Nye, Comparing
Common Markets: A Revised Neo-Functionalist Model, 24 INT’L ORGANIZATION
812 (Autumn 1970). For example, by the early 1990’s, there was widespread
support for closely integrating the Argentine and Brazilian economies among
politicians, business executives, academics and other opinion makers in both
societies, thereby facilitating the creation of MERCOSUR. On the other hand,
there was little consensus in Central America as to the wisdom of creating
a Common Market during the 1960’s, contributing, in part, to the eventual
stagnation of that integration process. Similarly, large numbers of the
opinion makers in certain EU countries have resisted the idea of surrendering
macroeconomic policy making to the European Central Bank, hence the refusal
 High levels of perceived dependence, whether the result of threats from the external world, exports to predominantly one country, or high reliance on external moral and physical aid, is thought to reinforce the desire for unity in order to “get out from under” the domination of the metropolitan power. Mario Barrera & Ernest B. Haas, The Operationalism of Some Variables Related to Regional Integration: A Research Note, 23 INT’L ORGANIZATION 152 (Winter 1969).
 Joseph S. Nye, Patterns and Catalysts in Regional Integration, 19 INT’L ORGANIZATION 881 (Autumn 1965). For example, Nye points out that European integration was helped by its initiation in an environment in which Europe had, as a result of WW II, undergone a drastic change from an autonomous actor to pawn in a bipolar power struggle.
 Although it has increased the negotiating power of the MERCOSUR countries (particularly the three smaller members) in the FTAA negotiations, U.S. negotiators have now also come to appreciate the bloc as facilitating negotiation logistics since at least four of the 34 countries have already worked things out among themselves before they sit down at the negotiating table.