2 Institutional Design of Regional Integration: Balancing Delegation and Representation

Regional economic integration is both a deregulatory project, involving the removal of barriers to the movement of goods and services, as well as a re-regulatory project, involving the adoption of common economic, social, and environmental standards to enable the market to function. The removal of trade barriers can be achieved by bilateral or multilateral agreements. However, the adoption of common rules requires the delegation of agenda-setting and enforcement to a supranational body to resolve policy coordination problems and enable states to credibly commit to implement market integration. The lesson from the experience of the European Union is that such delegation, if designed carefully, need not threaten national sovereignty, which is clearly a fear in East Asia. A supranational executive can be tightly controlled by the governments if (i) unanimity is required for any decision to delegate in a particular policy area, (ii) the governments are equally represented in the executive body, and (iii) there are high decision-making thresholds and checks and balances for the adoption of policy proposals by the supranational body. Such a design requires a certain degree of preference convergence among the governments to enable the initial delegation decision to take place by unanimous agreement. It also requires the establishment of an equitable system of representation and decision-making, which allows each state a fair chance to influence policy outcomes. Preferences may not yet have converged sufficiently in East Asia, but a system of representation can be designed which would allow states to be represented equitably in a supranational decision-making structure in the region, as the ASEAN+3 states have started to do in the Chiang Mai Initiative Multilateralization framework.