Hugo Chavez is not the easiest of customers. The former army paratrooper, who attempted a coup in 1992, burst into Venezuelan electoral politics in 1998 when his ‘Movement of the Fifth Republic’ swept to power on the back of a promise to transform the lives of the poor, the dispossessed, and the weak. In his whirlwind term in office he has faced an attempted coup, general strikes, and a referendum; and he has not been afraid to make enemies. The populist leader of the world’s fifth largest oil producer has attacked oil executives for living in ‘luxury chalets where they perform orgies drinking whisky’; the Catholic Church for ‘not walking in the path of Christ’; the media ‘for being in the pay of reactionaries’; and the United States for ‘fighting terror with terror’.1 But there is one thing that this soldier turned politician does say yes to: Mercosur, the Common Market of the South.
Finally, after five protocols and a decade of applications and failed attempts, Venezuela was admitted as an associate member on 8 July 2004, during a marathon meeting of the presidents (which also granted Mexico observer status, opening the way for it, too, to join in the future). This membership of Mercosur institutionalizes Venezuela’s tight new economic and political relations with Argentina and Brazil (including a doubling of trade with the former, and a tripling with the latter). Chavez was jubilant: ‘We want to see in our ships, in our pipes, in our medicines, and in other goods, the words “Made in Brazil” or “Made in Argentina” instead of “Made in the USA”.’2 Chavez’s desire to join Mercosur is driven by more than the quixotic anti-Americanism that drove him to open friendly relations with Castro’s Cuba and Saddam’s Iraq. It comes from a recognition that the alliance is becoming critically important to the future of South America.
Regional integration took off in Latin America when the leaders of the big countries in the region saw the enormous advances being made in Europe with the creation of the Single European Market. The origins of the alliance come from an attempt to defuse the prickly relations between Brazil and Argentina, while – as recently as the 1970s – they were engaged in a nuclear arms race. But what started as a bilateral initiative between these two countries was broadened to include Paraguay and Uruguay in 1991 when Mercosur was formed (Chile and Bolivia joined as associate members in 1996). The member-states agreed to form a common market with co-ordinated macro-economic policies in different sectors, including foreign trade, agricultural, industrial, and fiscal. They also committed themselves to harmonize their legislation and create political and economic integration. Mercosur has a political structure that is loosely modelled on the European Union. The Common Market Council (CMG) is made up of foreign affairs ministers and ministers of economy. The chairmanship of the Council rotates every six months among member-states in alphabetical order.3
The early success was impressive. Tariffs were eliminated on most internal trade by 1995, and a common external tariff was agreed as well as a common customs code. The average tariff applied to third countries fell from 37.2 per cent in 1985 to a low of 11.5 per cent in 1994. As a result, intra-bloc trade boomed – rising from $4.1 billion in 1990 to $20.7 billion in 1997. What is more, foreign direct investment flooded in too: rising from $2 billion in 1991 to a peak of $56.6 billion in 1999.4 Companies like Nestlé and Unilever reorganized their operations on a regional basis so that each product was made in a single factory for the region. In the car industry, firms such as Renault and Peugeot-Citroen, which had all but pulled out of the region, built new factories; Japanese companies also entered the regional market.
The creation of Mercosur had put the region on the world business map. But possibly the biggest success is the role that Mercosur has played in defending and strengthening democracy in South America’s southern cone. After Brazil and Argentina helped to defuse an attempted coup in Paraguay in 1996, Mercosur formally included a ‘democracy clause’ as a condition for remaining in the group. The twenty-first century did not begin well for Mercosur, with financial turmoil in Brazil and Argentina; but the entry of Venezuela and Mexico, coupled with the improving position of the Brazilian and Argentine economies, have put the Common Market back on track to eventually become an alliance that could integrate the whole of South America.5
Latin America is not alone. In Africa they have formed the African Union. Middle Eastern summits talk about the possibility of an Arab Union. East Asia has ASEAN and the Shanghai Co-operation Organization. South Asia has SAARC. The Pacific region has APEC. And North America has developed NAFTA and the Free Trade Area of the Americas to match the growing European single market.
While the global institutions such as the United Nations, the IMF and the World Bank continue to be playthings of the great powers, these regional organizations are starting to deliver real benefits. In Sudan in 2004, the African Union sent 4,000 troops to the Darfur region while the UN Security Council was bogged down in a debate about whether the violations really constituted genocide. In the Pacific, APEC is becoming a vehicle for promoting open trade and investment between the twenty-one countries of the region.6 The Arab world is talking of turning the Arab League into an Arab Union – complete with parliament and single currency – to build on the progress that has already been made on an Arab Free Trade Agreement, the Arab Monetary Fund, and the Islamic Development Bank.
Together these developments spell the emergence of a world of regions. As they learn to work together, and experience real benefits, they will gradually start to pool sovereignty in the way that the European Union has pioneered.
Many people have focused on the rise of great powers such as China and India and the implications they will have on world order. There is no doubt that they will challenge the ‘unipolar world’ shaped by the preferences of Americans and Europeans, who between them make up less than 10 per cent of the world’s population. But an even bigger threat to the ‘unipolar moment’ comes from the fact that there is another tier of countries around the world – from Brazil and Mexico to South Africa and Nigeria, Japan and South Korea – that is no longer satisfied with dealing bilaterally with Europe and the United States and accepting the decisions that come from their relative position of weakness.
These countries have looked on at the way the European Union has given tiny countries an ability to shape their destiny on the world stage out of all proportion to their wealth, military might, or population size. They have seen that regional clubs can help to over-come historical rivalries and tensions, foster democracy, speed up the integration of countries into the world economy, and help to develop common solutions to problems that cut across borders – from organized crime to pollution. The EU’s success has let the genie of regionalism out of the bottle, and it will be impossible to put it back in again. This new regionalism is not about autarchic blocs at war with one another: it is about clubs that promote global development, regional security, and open markets for their members. And as each region develops its own arrangements, they will cumulatively have an impact on world order.
Nearly five hundred years ago, Europe invented the most effective form of political organization in history: the nation-state. Through a series of wars and conquests, this form of political organization spread like a virus, so that by the twentieth century it was the only way of organizing politics – eliminating empires, city-states, and feudal systems. Because nation-states were most comfortable dealing with other nation-states, other political systems faced a stark choice: become a nation-state, or get taken over by one. By the end of the twentieth century the only way to have a seat at the table was to be a nation-state.
In the second half of the twentieth century, Europeans started to reinvent this model. As Europe develops ever greater global clout and spreads to take over a continent, other countries have been faced with an equally stark choice: join the European Union, or develop your own union based on the same principles of international law, interfering in each other’s affairs, and peace as an ideology. By the end of the twenty-first century, in the new regional world, you will need to be part of a club to have a seat at the table. This is why countries are coming together to maintain their clout in the world. This ‘regional domino effect’ is already changing our ideas of politics and economics and redefining what power means for the twenty-first century.
The world that emerges will be centred around neither the United States nor the United Nations, but will be a community of interdependent regional clubs. In Africa, the focus on peace-keeping reflects the fact that conflict is the biggest enemy of development in the region – as well as the strong desire not to have to rely on Western troops to solve African problems. In East Asia, the ‘Chiang Mai initiative’ is an attempt to put in place an Asian solution to currency speculation so that in a future Asian currency crisis member countries will not be forced to turn to the International Monetary Fund. Although under present rules the initiative will only lend members 10 per cent of their short-term financial assistance (with the remaining 90 per cent depending on IMF criteria), in the medium term it is likely that this region, which is famously awash with capital, will change the criteria to free itself from the IMF and the World Bank. In Latin America, too, economists have calculated that there are enough reserves in the continent to deal with any crisis (short of a melt-down of the Brazilian economy) without recourse to the IMF.7
The uniting factor behind all these initiatives is an attempt to get beyond the ‘unipolar world’. No country wants to be dictated to by superpowers or global institutions that they cannot control. In this world, it will be possible to maintain your identity and your sovereignty without being a superpower. But it will also be impossible to commit mass human rights abuses or genocide and use the United Nations’ doctrine of ‘noninterference in internal affairs’8 as a geopolitical do-not-disturb sign.
If regional organizations did not exist, they would need to be invented. Their rise is inexorable and startlingly rapid. But although this world is emerging of its own accord, Europe can give it a helping hand. The Americans precipitated the creation of the European Union by insisting that European countries had to work together if they wanted to get access to the money made available under the Marshall Plan after the Second World War. They made it a political reality by developing mutual security arrangements through NATO rather than dealing with each country individually.
The European Union could do the same thing. As the biggest donor in the world, Europe could use its aid to promote intraregional co-operation, tying money to economic integration, regional infrastructure projects, and regional organizations’ contribution to security. The EU has made a move in this direction through its 2003 approval for the African Peace Facility, which will provide ‘financial muscle’ for peace-keeping missions led by the African Union.9 It should use its position as the biggest market in the world to tie progress in world trade talks to the removal of regional trade barriers. And it should use its growing political voice to upgrade the importance of region-to-region dialogue. Instead of hatching deals with China, South Africa, and Brazil, we should aim to make important decisions in EU-Mercosur, ASEM, and EU-AU summits.
In the long term, Europe’s goal should be to create a Union of Unions that brings these regional organizations together, in the way that the European Union brought the Coal and Steel Community, Euratom, and the European Community together into a single European Economic Community. A ‘Community of Regional Entities’ could become the primary co-ordinating body of the United Nations. This would not necessarily have to replace the Security Council and General Assembly, but the forum for regional organizations would be the best place to deal with the two most pressing issues on the global agenda: development and peace-keeping.10
Our experience with the European Union has shown that the way to construct a new order will not be to start with a grand constitutional design but to create an interest in working together on the pressing problems. By forming a series of overlapping clubs to deal with trade, nuclear proliferation, economic development, global diseases, and propping up failing states, it might one day be possible to bring them together into a single framework.11
As the momentum for regional organization picks up, great powers like the United States will inevitably be sucked into the process of integration. They might be able to slow the process, but they won’t be able to stop it. By opposing it they will harm themselves by provoking regional clubs to organise against them. However if they embrace it, they will enhance their power, and by doing so act as midwives for this emerging new world order. As this process continues, we will see the emergence of a ‘New European Century’. Not because Europe will run the world as an empire, but because the European way of doing things will have become the world’s.