Regional Integration

Hiro Lee (OSIPP)

Course Objective
   In this course, we will learn about economic integration, its consequences, and its policy implications in two of the major regions of the world: Europe and Asia. The effects of the Single Market on the product markets, labor markets and welfare of EU member states will be assessed, and the significance of multinational corporations, fragmentation and production networks in Asia will be examined. Some references to the applicability of the European integration experience to Asia will also be made.

Learning Goals
   After taking this class, students should be able to understand the differences in economic integration between Europe and Asia and circumstances when regional integration would lead to greater benefits to member countries. In addition, one should be able to evaluate the benefits and costs of Trans-Pacific Partnership (TPP) and other FTAs.

Requirement / Prerequisite
   Introductory microeconomics.

Class Plan

	Theme	Content
Week 1	Economic Integration in Europe: Introduction and History	Europe in the early postwar years; the Treaty of Rome and the creation of the European Economic Community (EEC)
Week 2	History of European Economic Integration	Domino effect; the Single Market Programme; the Maastricht Treaty; EU enlargements; creation of a unified economic area
Week 3	Microeconomic Tools and MFN Tariff Analysis	Consumer and producer surplus; open-economy supply and demand analysis; effects of a tariff; DCR (domestically captured rent) barriers vs. FCR (foreign captured rent) barriers
Week 4	Economics of Preferential Liberalization	Customs union theory; effects of discriminatory liberalization: small country case
Week 5	Economics of Preferential Liberalization	Welfare effects on partner country and rest of the world; customs union vs. free trade agreement (FTA); rules of origin; empirical studies
Week 6	Economic Integration, Labor Markets and Migration	European labor markets; migration and labor market integration
Week 7	The Eurozone in Crisis	Euro and the European Experience; benefits and costs of joining the euro; theory of optimum currency areas; case study on the Greece debt crisis
Week 8	Regional Integration in Asia: Introduction	Integrating Asia; how regionalism can benefit Asia; benefits and costs of regional integration in Asia
Week 9	Asian Regionalism: Context and Scope	Growth and integration; flying in sequence; the financial crisis of 1997-98; the rise of regionalism
Week 10	Integrating Production	Fragmentation, production networks and regional trade; parts and component trade; role of multinational corporations (MNCs)
Week 11	Integrating Production	Trade integration; integration through foreign direct investment (FDI); production networks in the US-Mexico vs. East Asia; policies for sustained growth and integration
Week 12	The Economics of Asian FTAs	Best practices for subregional FTAs; supporting deeper integration; empirical studies on FTAs in Asia
Week 13	Trans-Pacific Partnership (TPP)	Benefits and costs of Japan's participation in TPP; analysis of TPP
Week 14	Making Growth Inclusive and Sustainable	Achievements and challenges; labor market reforms; education and skills; sectoral strategies; infrastructure development; health and safety; labor migration; environmental issues.
Week 15	Summary and Review	Summary and review of important issues and concepts

Type of Class
   Lecture

Independent Study Outside of Class
   Read required readings before each lecture and go over lecture notes after class.

Textbooks
   Baldwin, Richard and Charles Wyplosz, The Economics of European Integration, 5th Edition. London: McGraw Hill, 2015.
   Asian Development Bank (ADB), Emerging Asian Regionalism. Manila: ADB, 2008.

Reference
   A reading list will be distributed at the first lecture.

Grading Policy
   Final examination (70%), attendance (20%), and participation in discussion (10%).