External and internal institutional environment

The response to the Asian financial and the Eurozone crisis was also framed by the international and regional institutional environments. As outlined above, primary institutions such as, for example, US hegemony, shape international order and are supported by a range of secondary institutions. At the global level, these include regimes enshrined in the IMF, the GATT, the WTO, and the UN. It is this international institutional environment which offers the framework conditions for the regional institutional infrastructures in Europe and East Asia. Changes in this international institutional framework are bound to have an impact on regional developments. The US-led international order continued to flourish during the 1990s. It seems to be in decline since the 2010s, affected by the rise of non-Western powers such as China and their challenge to US hegemony as well as the trouble and discontent within many liberal democracies. Even more damaging, however, may be the abandonment of long-held established norms, principles, and relationship by the US under the Trump administration.

Regional institutions themselves can become important drivers of regionalism. They offer a model for future institutional structures crafted on top of, or alongside, them. European regionalism did not emerge out of nowhere. There had been a long historical trajectory of custom unions and other institutional arrangements that offered a foundation for post-1945 European regionalism. The European Coal and Steel Community (ECSC) provided the platform for future institutional developments. Regional institutions can also emerge as drivers of other instances of regional cooperation. Through virtue of its long existence and its complex institutional structure, the EU and its institutional arrangements offer a repositor}' of ideas for regional institution-building elsewhere. That is not to say that other regionalisms strive to copy EU-style institutionalisation. More often than not, the EU represents the ‘other’, and EU-style institutions are merely crafted on top of already existing regional structures, mimicking the EU rather than changing in form and shape (Dri, 2010; Wunderlich & Mattheis, 2017). Nonetheless, as we have seen, Southeast Asia leaders were looking to the EU for inspiration in reforming ASEAN.

At the same time, regional institutions develop resistance to major change. Institutional density plays a crucial role. Indeed, a dense institutional environment tends to firmly entrench institutional pathways, making deviation difficult. Both ASEAN and the EU have established relatively complex and overlapping institutions, locking in a certain path-dependency. Much has been made of ASEAN’s intergovernmental and informal version of regionalism. The organisation has managed to create a complex institutionalised framework for managing regional relations. The differences with the EU’s deeply structured, highly legalised, and partly supranational institutional environment can be explained by the historical circumstances surrounding European integration and ASEAN’s formation. ASEAN’s original purpose was to support the development of a modern state system in post-colonial Southeast Asia. This accounts for the central role ofsovereignty and non-interference which were reaffirmed in the ASEAN Charter. Similarly, European integration was driven by a desire to overcome the security dilemma inherent in the state system. The result has been a mix of intergovernmental and supranational institutions with an emphasis on deeper integration.

While ASEAN may be emerging as a more rule-based organisation, it remains firmly intergovernmental. Its institutional core, with its emphasis on sovereignty and non-intervention, remains a key defining feature of the organisation and has been firmly enshrined within the ASEAN Charter. The AFC highlighted the need for institutional reform, but institutional choices continue to be framed by historical norms which remain the baseline for further development. The meaning of those norms is currently being debated within ASEAN, reflecting their dynamic character in a fast-changing international environment characterised by transnational challenges such as environmental problems, terrorism, or refugee movements.

Path-dependency also explains the institutional response of the EU to the Eurozone crisis. The EFSF, the ESM, the Six Pack, the Two Pack, the European Semester, and the Fiscal Compact were designed to address the institutional shortcomings of the Eurozone. They were layered on top of the EMU rather than presenting a full-scale institutional reform (Verdun, 2015). In sum, the crisis triggered a series of incremental reforms to address the institutional deficits in the Eurozone. As we have seen, Eurozone member states - under the leadership of Germany - have assumed a critical role: first by fostering (institutional) differentiation within the EU between the EU Member states inside and those outside the Eurozone; second by strengthening the intergovernmental tools such as empowering the European Council as a key policy broker during the crisis. Concomitantly, however, established institutions such as the ECB, the IMF, and the European Commission have been entrusted with important oversight rights; not only vis-à-vis the crisis-ridden countries, such as Greece in particular, but also by the Commission’s key role in the European Semester. Thus, some scholars have come to conclude that these bodies have been ‘the winners’of the crisis (Bauer & Becker, 2014) whereas others have put the emphasis on ‘new intergovernmentalisf readings of the crisis (Bickerton et al., 2015).¹* In either case, the crisis helped accentuate the internal divide between supranationalism and intergovernmentalism.