The lowest the number of the regional integration areas, the higher the propensity for protectionism (Krugman). The revival of regional protectionism measures meets the case of a commercial warfare. In the largest integrated market, investors must “play” by strict rules, so that a balance between productivity and risk should be kept. The elasticity in replacing the goods interchanged across local areas commensurate with the frequency of intra-regional and extra-regional goods replacement by consumers, depending on how prices evolve. The challenge of cross-area regional integration commercial warfare might lessen to the extent that these few areas are strong enough to build their global commercial relationships upon cooperative arrangements rather then conflict-wise solutions.regional integration; protectionism; commercial warfare; elasticity; global cooperation; Romania’s commercial security;

Rotaru, Marius-Petre

English

Research Papers in Economics

469 
REGIONAL INTEGRATION AND THE NEW TYPE OF 
COMMERCIAL WARFARE 
Rotaru Marius-Petre  
Address: West University of Timi oara, Faculty of Economics and Business Administration, Str. J.H. 
Pestalozzi nr. 16, cabinet 101, 300115, Timisoara 
Tel.: 0721.234.576, E-mail: marius.rotaru@yahoo.com 
 
Abstract:  The  lowest  the  number  of  the  regional  integration  areas,  the  higher  the  propensity  for 
protectionism (Krugman). The revival of regional protectionism measures meets the case of a commercial 
warfare. In the largest integrated market, investors must “play” by strict rules, so that a balance between 
productivity and risk should be kept. The elasticity in replacing the goods interchanged across local areas 
commensurate with the frequency of intra-regional and extra-regional goods replacement by consumers, 
depending on how prices evolve. The challenge of cross-area regional integration commercial warfare 
might  lessen  to  the  extent  that  these  few  areas  are  strong  enough  to  build  their  global  commercial 
relationships upon cooperative arrangements rather then conflict-wise solutions. 
 
Keywords:  regional  integration,  protectionism,  commercial  warfare,  elasticity,  global  cooperation, 
Romania’s commercial security. 
1. Introduction 
No country is immune to the effects of regional commercial agreements because they are more and more a 
part of the present configuration of global economy. Probably at a given moment in time, questions over 
the  potential  partners  and  the  measures  that  should  be  implemented  are  raised  in  every  country.  The 
answers to these questions cannot be found easily because the states are different one from the other 
through  structure  as  well  as  politic  and  economic  goals.  Nevertheless,  it  is  certain  that  preferential 
agreements  stimulate  trade  between  Member  States  due  to  the  elimination  of  barriers  regarding 
interregional flows. The question is whether this increase of interregional trade is positive for each Member 
State, entire commercial block and/or entire world. 
Economic integration is a dynamic, multidimensional, complex process, which became an important issue 
of international economy, especially in the last decades. When we speak about economic integration, we 
consider three aspects: 
•  regional integration 
•  preferential trade arrangements 
•  commercial blocks 
This integration supposes, in its simplest form, the discriminatory elimination of all commercial barriers of 
flows between at least two countries and the establishment of some coordination and cooperation elements 
between them. 
The economic integration is  the result of an action  made by a complex of factors of  which the  most 
significant parts are estimated to be the economic and political factors. One the one hand, the economic 
disparity between western European countries affected by World War II and USA – whose place have been 
grounded significantly in the global economy – was one of the main economic reasons that generated the 
idea of a tighter cooperation in Western Europe. On the other hand, the avoidance of some possible future 
conflicts between France and Germany, which were already having tense relationships from the end of the 
19
th century, bringing back Western Europe to its status of global power and stopping USSR’s expansion 
are mentioned frequently as politic reasons that caused the integration process in Europe. 
No matter the nature of the most important reasons, the political and economic factors are interdependent. 
The integration supposes the need of cooperation and coordination that powerfully reproduces in the more 
advanced stages of this process. Besides economic and politic premises, geographical and cultural factors 
had been brought into discussion. 470 
Paul  Krugman  states  that  geographic  neighboring  causes  the  existence  of  some  “natural”  commercial 
blocks created between partners who exchange a significant part of their commercial flows between them. 
Samuel Hungtington presents the culture as a force that establishes and divides at the same time. Therefore, 
the states with cultural affinities cooperate economically and politically and international organizations like 
the EU, formed by states with mutual cultural features are more successful than those that try to transcend 
the cultures. 
The economic integration determines the transformation of the present international system and somehow 
alternates the classic vision over the suzerainty and country’s role. 
The tendency of some regional commercial blocks’ appearance is caused by the influence of some factors: 
•  endogen 
•  hexogen 
Endogen factors are the result of the evolutions that took place inside of a country already developed. 
•  Fundamental  options  of  similar  economic  politics  and  therefore  mutual  conception  over 
development 
•  Trade liberalization politics promoted by multiple developing countries, process which will 
ease the increased liberalization in the  view of a  future  integration  with  more developed 
countries 
•  Economic  barriers  with  which  the  states  have  been  confronted  with,  as  a  result  of  the 
energetic crisis which had as an effect the awareness of the fact that there is a development 
potential which hasn’t been exploited enough. 
Among hexogen factors, there are: 
•  The assuring way of the potential risks caused by regional events or events that are far away 
•  Attempts to compensate possible losses caused by the decrease of some external markets with 
an increase of group exchanges, as a result of some integration processes as well 
•  The desire of political balance and consolidation of democratic systems 
2. Regional integration and the new type of commercial wars 
2.1 Trade’s freedom and economic welfare 
Nowadays is admitted that the idea of a world where dominates the exchanges’ freedom is more profitable 
than that in terms of the tariff and non-tariff barriers in trade’s way. 
Nevertheless, in reality, the possibility of organizing trade’s freedom on a local scale is more probable than 
on a global scale. Therefore, after the end of World War II, a series of regional integration area began to 
appear. 
If global free exchange seems hard to be achieved, at least now, it is possible to consider, at least as a 
transitory idea, the creation of regional integration area as a second best choice. 
After World War II, we can observe a more regional than global orientation of international trade. 
The most powerful regionalization of trade is made in Europe, the most significant example being given by 
the EU. The tendency of regionalization had been present especially since the 80’s. The intra-European 
underlining of exchanges followed a trade’s stagnation period during the 70’s while for Asia the 8
th decade 
of the past century is related to one of the highest period of economic increase despite the inter-Asian 
exchanges have not been so outlined. 
If we analyze interregional trade’s dynamics in relation to GDP, interregional trade’s side appears to be 
sensitively increased than global trade in general
203. 
In 1987, the report for USA was 11.4%, 21.8% for Japan and South-East Asia and 13% for Western 
Europe. 
                                                            
203 R.C. Hine, “Regionalism and the integration of the World Economy”, Journal of Common Market Studies no 2, 
1992 471 
2.2 The development of the regional integration areas 
P. R. Krugman shows that the tendency towards protectionism gets higher as the number of the regional 
integration areas decreases.
204 Its empirical tests highlight that areas’ number which could minimize world 
welfare is three, which corresponds to the present case (European area – around the EU, Asian area – 
around Japan and American area – around USA). 
R.C.  Fenstra  studied  also  this  matter.  Starting  from  GATT
205  Member  States,  he  established  a  global 
standard of exchanges according to the three blocks: North and South America, Europe and Africa, Asia 
and the Oceans. The analysis made considering the regional income spent for importations from other 
regions from 1988 show that more than a half of international trade is interregional. More precisely, total 
trade  represents  almost  20%  of  global  income  and  the  exchanges  between  regional  areas  raise  up  to 
approximately  8%  of  world  income  (see  2
nd  column  of  Table  no  1).  There  had  been  made  forecasts 
regarding two different hypotheses: 
•  A trade’s decrease to half between regions because of the reappearance regional protectionist 
measures, which means a state of commercial war 
•  The variables’ values of substitution resiliencies of goods exchanged between regional areas  
(substitution values’ variability of goods exchanged between regional areas) 
These resiliencies measure the intensity of which consumers operate (make) a substitution between local 
goods  and  those  which  are  from  outside  the  area,  depending  on  their  prices’  evolution.  R.F.  Fenstra 
mentions three values of the substitution resilience: 1,5; 2; 3. 
These values correspond to: low value – 1.5; average value – 2; high value – 3 in comparison with the 
usual values obtained by empirical tests. 
 
Regional Areas  Trade with other groups of 
regional 
Substitution resilience 
1,5  2  3 
North and South America  2,1  7,2  3,6  1,8 
Europe and Africa  6,4  6,4  3,2  1,6 
Asia and the Oceans  14,7  11,7  5,8  2,9 
World Average  8  8  4  2 
Table 1: Percentages in world trade of regions and costs of a commercial war 
(Source: R.C. Fenstra, 1992)  
 
According to substitution resilience’s value, world welfare will be more or less affected as a consequence 
of exchanges’ decrease. Extra-regional trade’s part would remain constant at 2% of world income if trade 
between regional integration areas would decrease to half and if substitution resilience’s value would be 3. 
Trade would remain constant at 8%, with a substitution resilience of 1.5. Nevertheless, commercial wars’ 
risk of regional integration internal areas could be reduced if these areas are few and have a sufficiently 
important economic percentage in order to incite them to better look for resolutions by cooperating than to 
remain in conflict when it comes to international commercial relationships. 
It is also possible the idea according to which a very fragmented world would allow a higher welfare than a 
world in which there would be just a couple of regional groups. In absence’s case of regional integration 
                                                            
204 P.R. Krugman, “Is Bilateralism Bad?” in Helpman, Ehlanan and Raniz Eds. International trade and trade policy, 
Cambridge, 1955, republished 1991 
205 General Agreement on Tariffs and Trade created in 1947 is the institution, which arbitrates commercial conflicts. 
123 states joined GATT agreement, number that represents 90% of world trade. After the meeting in Tokyo (Tokyo 
round) non-tariff barriers have been eliminated. In 1986, the negotiations during Uruguay round led to the elimination 
of commercial barriers and discrepancies by extending the protection and services of intellectual property. On April 12 
– 15
th 1994 the Ministerial Conference of GATT in Marrakech had marked the end of GATTso that from 1995 all 
aspects related to international trade to be solved by Trade World Organization. 472 
areas, the risk of non-tariff markets’ occurrence for the tertian states would be more indicated but would 
affect less the countries than a case in which a single group (EU for example) would form its own market 
in relation with one or more of its activities. Such discrimination would seem suddenly dangerous given the 
importance of the European market and would imply permanent negotiations for the attempt to balance the 
interests of the multiple parts. With a fragmented market obstructioned by non-tariff barriers, global loss of 
welfare might be bigger as every country could be affected differently (the existence of a commercial 
prejudices atomicity), their individual reaction might be less efficient in the fight for exchange barriers’ 
elimination. Globally speaking, it can be concluded that regional agreements doesn’t appear as obstacles in 
world trade’s development, but represent in Pareto optimum terms a second best resolution in comparison 
with free world trade because they introduce a new type of protectionism and begin some new commercial 
wars which are more destructive for most of world’s countries. 
A significant part of observers and theoreticians of contemporary globalization almost unanimously focus 
on the aspect of interstate and inter-firm competition and less on the concept of economic war, which is 
considered to be exaggerated and therefore inadequate to the present context. 
Some authors consider that we are finding ourselves inside of an economic war led at different levels by 
enterprises and states looking for supremacy as they noticed that globalization doesn’t have a peaceful 
character and it’s effects are ill-fated for some countries and regions,. 
3. Conclusions 
Economic war is rarely treated seriously, even in the media, where some titles as “textiles’ war”, “shoes’ 
war”, have more purpose to get the attention than to explain it. The followers of the idea that free capital 
and merchandise circulation is a pacifying way for the countries have doubted themselves. According to 
them, competition is the key aspect, and some of them – like Elie Cohen – even minimized the competitive 
side of globalization’s circle: “Starting with Paul Krugman it is known the fact that nations’ problem isn’t 
competitiveness, that to do better what the neighbor had done, but winning segments of the market. The 
main  issue  is  efficiency  or  a  country’s  capacity  to  produce  better  and  more  efficiently  using  its  own 
physical  and  human  capital  and  within  the  technological  and  scientific  resources.”  Getting  out  of  the 
context the economic war to make it unique and analyze its implications in globalization’s context may 
seem inadequate considering the fact that most of the times wars which human kind had known have had 
an economic side permanently. Except the campaigns in Iraq and Afghanistan, the last World War is a part 
of a long series of major conflicts marked by the destruction of human lives and material goods, where 
economic interests have played a key part. 
War  implies  a  violent  action  and  from  here  the  indecision  to  extend  its  meanings  towards  present 
international economic space where competitivity concept, even if implies the existence of winners and 
losers, distances itself from the destructive effects of a “real” war. The fact that economic wars have mixed 
with military wars led to believing that they will disappear in peaceful times. Nevertheless, countries’ 
interests did not harmonize through large-scale commercial exchanges caused by globalization as shows 
the neo-liberal speech focused on the idea of the pacifying market. 
Christian  Harbulot,  an  expert  of  the  economic  war  notices  that,  from  the  nationalist  point  of  view, 
economic war begins to make a meaning hidden not only by liberalism but also by Marxism. While it was 
focusing on the imperialism as a supreme stage of capitalism, Marxism was omitting the “un-ideological” 
analysis of the confrontations between national economies. Ideology war’s disappearance did not lead for 
now to economic confrontations’ disappearance. Globalization, within its rivalries, which is inducing to the 
international actors, leads to economic conflicts, which, in certain terms, can jeopardize national safety. 
That  is  especially  why  Harbulot  was  warning,  “It  is  urgent  for  us  to  establish  very  clear  distinctions 
between national interest and over-national interest, between enterprises’ competitive objectives and those 
of national economies.”   
In theory, world economic competition implies the participation of the countries and enterprises in the race 
for the maximum benefits’ achievement for consumers and stockholders so that it can be stated that the 
main reason for these actors of globalization is the destruction of the enemies. 
Such a vision does not take actually into consideration the existence of some complex politic and economic 
connections between the states of the world. The interests and rivalries among the great powers continue to 
exist even when ideologies stop to divide the two sides. China, a special “capitalist - communist” hybrid 
case, is not unanimously seen as a potential violent “enemy” by politicians and businessmen. 473 
In the same time, powers’ distribution at the global scale has met important changes during communism, 
materialized in the highlighting from multilateralism to American unilateralism of whose motivations are 
obviously found not only in wishing to guarantee planet’s safety. What globalization and geo-political 
interests are creating today is a war that cannot be defined easily. It is more about a complex use of 
economic  weapons at different levels  where the politics is involved or not, acts from the shadows or 
relatively up front. 
Human kind has a long way to take until that global perfect “game” where everyone is winning. That is 
especially why the definition of state’s role in market’s economy and in its connections with the national 
private firms is a matter that deserves to be analyzed in order to clarify the ambiguities. 
The dynamics of the connections between national state and firms has met an historical evolution filled 
with its local culture, influenced by groups of interests, ideologies and external events. These facts are 
making us today to be the witnesses not only of a new global unique capitalism but also of an entire series 
of variations on the same subject distributed in the entire world. 
The  difference  between  competition,  economic  war  and  economic  weapon  is  not  always  clear.  The 
interests of the states of the world still remains in the center of the policies promoted by these even when 
they sign integration agreements, which leads to ambiguities and confusions as so-called the “economic 
patriotism”. On long term, the effects of the accelerated economic competition between enterprises and 
states can be disastrous for environment and irreplaceable natural resources as the “winners” could be on a 
first level those territories poor in resources, which ended this way to depend on the “relationships” given 
by the “protectors”. 
Albert Hirschman noticed that it could not be spoken of equity when it comes to commercial exchanges 
between a powerful country and a weak one because the strongest always will impose the commercial 
terms that are most advantageous to it. It can be easily deduced, when is the case that a great power could 
block the importations of some merchandise from countries, which wishes to undermine politically and 
economically. 
But  even  dumping  policies,  commercial  barriers,  licenses’  administration,  brains  and  labor  force’s 
migration, the increase of petroleum’s price, financial crises can, in certain terms, produce the undermining 
of a national economy. 
 
 

Regional integration and the new type of commercial warfare

Abstract

Similar works

Full text

Available Versions

Research Papers in Economics