European Integration Model: Lessons for the Central American Common Market. Jean Monnet/Robert Schuman Paper Series Vol. 6 No. 4 February 2006

[Introduction]. Under the stimulus provided by the formation of the European Economic Community in 1957, interest on economic integration spread particularly to less developed countries (LDCs) during the early 1960s. Most of the regional integration arrangements signed by then by these countries failed to match expectations. By contrast, regional integration efforts in Western Europe were in general more successful. In the 1970s and early 1980s the slowdown in the European integration process and the failure of similar regional initiatives in the Third World led to a decline of integration theory and praxis. After this decline, regionalism has made an impressive comeback around the world. The increasing creation of formal structures of regional integration around the world has led to distinguish between the new regionalism of the present and the old regionalism of the 1960s. Despite the problems raised in the past, recent economic policy debate in LDCs has been characterized by a renewed interest in subregional economic integration as a means of stimulating growth and confronting the challenges posed by the increased regionalism in world trading system. In Central America a new attempt has been made to revitalize the Central American Common Market (CACM) created in 1960 by Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua. The new integration scheme is still subject to numerous limitations hampering the effective encouragement of the Central American economic development. The objective of this paper is to compare the new CACM with the successful experience of economic integration in the European Union (EU), drawing lessons that may serve to overcome its current limitations. The structure of the rest of the paper is as follows. The first section examines the theoretical basis of the European model of economic integration, identifying the main components which may contribute to explain the rationale of economic integration among LDCs under the old and new regionalism. The second section explores the major features acquired by this European model of economic integration in its implementation, paying particular attention to its legal and institutional system and its set of common actions and policies. After presenting the theory and praxis of the European integration model, the third section carries out a comparison between the EU and the new CACM, taking into account the prevailing structural differences between both regions. The fourth section ends the paper with the major conclusions drawn from that comparison