From shallow to deep integration

The significance of the distinction between ‘shallow’ and ‘deep’ modes of economic integration has been increasingly recognized since the 1990s (see in particular Kahler 1995). As we saw in the Introduction to the present volume, shallow integration, at the global or regional level, is economic integration based on the removal of barriers to exchange at the border, with limited coordination of national policies. Under a regime of shallow integration domestic policies are regarded as matters to be determined by the preferences of the nation’s citizens and its political institutions. Such a mode of economic integration imposes minimal constraints on domestic policymaking. Thus, the Bretton Woods regime of the post-war era permitted national policymakers to focus on domestic problems while enabling global trade to recover from the war, and indeed to flourish during the 1950s and 1960s. Governments were left free to run their own independent economic policies and to erect their preferred versions of the welfare state. The General Agreement on Tariffs and Trade (GATT) and the IMF were core global institutions in the management of shallow integration. While the GATT negotiations were responsible for sharp reductions in at-the-border restrictions on trade in goods and services, the problems of using the GATT to govern the increasingly complex world trading system were becoming more and more obvious by the 1980s.

As economic integration advanced it became clear that domestic, ‘behind-the-border’ policies that had not been previously subjected to international scrutiny, could pose serious impediments to trade. Thus issues of deep integration emerged on the international agenda. Instead of the older agenda of removing barriers that block exchange at national borders, these new agenda items included conflict over domestic regulatory regimes and perceived policy spillovers, as well as concerns over environmental externalities and risk management. In short, the transition to deep integration seemed to require analysis of the economic, political, and scientific aspects of virtually all domestic policies, regulations, and practices. As a consequence the distinction between domestic policy and international trade policy tends to disappear under deep integration since any discretionary use of domestic regulations can be construed as posing an impediment to – and transaction costs on – international trade: ‘Global rules, in effect, become the domestic rules’ (Rodrik 2011: 83).