United, but not with Europe

Four times the population of the EU's 27 member states, a surface area of 14 million square kilometres and a GDP of more than USD6 trillion: these are the characteristics of the free-trade bloc formed on 1st January by China and the countries of ASEAN (Association of Southeast Asian Nations), which include Indonesia, Singapore and Thailand.

In uniting with the ten-member trade bloc, Beijing has sent a clear message that it has embraced a policy of joining forces with its neighbours rather than one of perpetuating competition between them. In 2013, the China-ASEAN group may be enlarged to included Japan, South Korea, Australia and — in the event of the resolution of its long-standing conflict with China — even Taiwan. In the next 20 to 30 years, the most powerful political union of all time will be established in Asia, where the free trade bloc will pave the way for customs and monetary union, points out Professor Krzysztof Rybinski of the Warsaw School of Economics.

An economic counterweight

At the same time, Experts are wondering about the potential impact of the single economic space between Belarus, Russia and Kazakhstan, which was also launched on 1st January. For the time being, the trio of countries that are also members of the Eurasian Economic Community (EAEC) only forms a customs union. The stated objective of constituting "a counterweight" to the EU ought to attract more former members of the Soviet Union. However, the current context, which is characterized by the lack of a long-term action plan for the bloc and the obstacles of unfavourable tax systems and unyielding bureaucracy, is likely to remain a major impediment to the development of trade within the EAEC.

Even if there is no real competition from the EAEC, the European Union cannot afford to rest on its laurels at a time when the EU economy increasingly resembles an athlete who has replaced a weight training programme with a regimen of happy meals. In recent years, Europe has registered a negative balance of trade, and consistently buys more than it sells. And the contrast between Europe's enormous GDP of USD19 trillion and the decline in economic growth in the Union (approximately 0.5% in 2009, as opposed to 3% in 2006) is a clear sign of a bleak outlook for the future. At the root of this malaise is a failure to focus on the priority of economic development which has largely been sidelined by the project of political integration.

NAFTA GDP is catching up with EU

Nonetheless, the initial success of the EU has inspired other regions of the world to create their own unions. For the most part, these will not exert any real power for several decades to come, but they have already begun to appropriate a share of markets that used to be the sole preserve of Europe. According to the International Monetary Fund, Europe's share of global GDP is set to decline from 30% to 25% by 2014. In terms of GDP, NAFTA — which includes the US, Mexico and Canada — already rivals the EU, but the NAFTA economy is developing at a faster pace, even in the throes of the economic crisis. The strength of the US-led customs union resides not only in the harmonisation of tariffs, but also in a policy of reciprocal investment between member countries.

Notwithstanding the tensions created by US immigration policy, which remains opposed to the free circulation of labour, NAFTA will likely pave the way for an American economic union, and at some point in the future it is likely adopt a common currency: the "amero." To date, the accession of South American countries to NAFTA has not been possible for the simple reason that they already form part of their own powerful economic union. As early as 1969, Peru, Bolivia, Ecuador and Colombia founded the Andean Community, which in 2008 participated, along with Mercosur (led by Brazil and Argentina), in the creation of the Union of South American Nations (UNASUR), designed to unite all of Latin America in a structure similar to the EU. UNASUR will certainly need time before it becomes a serious contender. A fact highlighted by the regular recurrence of economic crises in South America, although Brazil remains a powerful country with a reliable economic policy, says Krzysztof Rybinski.

Islamic finance, a new global player

Africa is also beset by economic crisis. Agricultural subsidies in the EU and NAFTA continue to constitute an effective barrier for African exports, and the extremely low level of external trade is further hampered by the lack of technology and huge levels of debt. Today, hope for the Africa is mainly focused on the flow of business from India and China, which have invested USD80 billion in the continent in recent years, and the EU would do well to adopt a similar policy of providing support in the form of business know-how instead of restricting its intervention to the sending of convoys of humanitarian aid.

The Gulf Cooperation Council (GCC) is increasingly becoming a global player. If its members decide to invest revenues from oil sales in financial and technologies and institutions, their economies will no longer depend on raw materials and could dominate other economies in the region. As for the initiative to develop an Islamic banking system aligned with Shariah law, the benefits of GCC (such as the stabilization of the financial system, notably through a ban on usury) have yet to be proven. Perhaps these measures will constitute a wholly new value on an international scale?

European Institutions

Mongolia's head doesn't know which president to choose

The world is deeply confused about post-Lisbon Europe, writes Ian Traynor in the Guardian. Supposed “to cure Europe's malaise” in “supplying strong and coherent leadership”, the coming into force of the treaty nine years in the making has led to “turf wars and rival presidents,” with Herman Van Rompuy, Jose Manuel Barroso of the Commission, José Luis Zapatero heading Spain’s rotating EU presidency and Jerzy Buzek of the EP all jostling for position. “When Mongolia's leader, Tsakhiagiin Elbegdorj, visited Brussels last week he was nonplussed by the plethora of "European presidents" whom protocol prescribed he must meet”. A senior European diplomat describes "A lot of handwringing and bitching. No one is coming through to lead. It's not a pretty picture at all and it looks pathetic to the rest of the world."