Shallow market integration and weak developmental capacities: Ukraine’s pathway from periphery to periphery

Abstract

How do transnational integration regimes (TIRs) shape domestic developmental capacities to benefit from trade integration? Some scholars acknowledge the passive influence TIRs can have on domestic capacities to spur development. Others conceive of TIRs as active agents of change but disagree as to whether their effects are positive or negative. This paper takes issue with some of these approaches and reveals important caveats of others by investigating how the shallow mode of transnational market integration shapes domestic developmental capacities. The paper uses the developmental pathway of Ukraine’s automotive industry as a case study. Strikingly, the sector maintained its peripheral position despite initial developmental features that made it as good an investment destination for multinationals as automotive sectors in other peripheral economies that eventually became more integrated in transnational value chains. I argue that it needs strong states being able to use the opportunities offered by the shallow mode of integration for development. By contrast, weak states can hardly shield themselves against capture by rent-seeking networks, since TIRs only provide limited assistance for building developmental capacities in the context of shallow integration.