Advanced Search
MyIDEAS: Login

The new regionalism and the threat of protectionism

Contents:

Author Info

  • Hallet, Andrew Hughes
  • Braga, Carlos A. Primo
  • DEC

Abstract

Drawing on the game theory concepts, the authors discuss why countries form themselves into trading blocs and what the relations between these blocs are likely to be. They identify three types of regimes: (a) unilateral trade policies - which are noncooperatives; (b) multilateral agreements (such as the GATT) - which are cooperatives; and (c) coalitions (regional integration arrangements or minilateral agreements) - which are mixed (cooperative internally and noncooperatives externally). The authors argue that regional integration arrangements can work better than global rules as precommitment devices for internally cooperative policies because they create a denser network or interlinked policy targets. The losses for a participant ostracized (or disciplined) by his bloc are immediate and tangible. Crucial to the results of analysis is the external policy stance adopted by each bloc after it has formed. External relations will determine whether regional blocs are welfare-improving, consistent with the aims of the GATT, and a vehicle for securing commitments or the regime; or whether theywill become a vehicle for spreading"political economy biases."Should higher or lower external barriers be expected for nonmembers? That depends on how large the benefits or costs, in trade and investment creation (or diversion), would be to members if the mover to free trade within the bloc is not accompanied by any increase in the bloc's external barriers (an"open"bloc). Widening tends to be easier the more open a bloc is, since insiders are less concerned with the erosion of their preferences. In the alternative scenario, lower intra-bloc trade and investment barriers are accompanied by an increase in the external barriers, giving any specific set of potential participants strong incentives to join (a"closed"bloc)."Deepening"by expanding the list of variables covered by the trade agreement also tends to make the bloc more cohesive. In both cases - a closed bloc or deep integration - greater cohesion is obtained at the cost of increasing the costs of entry for nonmembers. The hope that regional integration arrangements can pave the way for global free trade is unrealistic. As regional integration arrangements enlarge, they may be better off exerting market power against outsiders rather than following a globally cooperative path. Inter-bloc trade relations will ultimately depend on how effective special interest groups are at distorting bloc-wide trade policies that suit their interests. A multilateral trade system inhibits noncooperative behavior among trading blocs. The successful conclusion of the Uruguay Round extended and deepened the network of variables covered by multilateral rules. For developing countries, a working (even imperfect) multilateral trade system remains the best hope against excesses by those with market power.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www-wds.worldbank.org/servlet/WDSContentServer/WDSP/IB/1994/08/01/000009265_3970716141641/Rendered/PDF/multi0page.pdf
Download Restriction: no

Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 1349.

as in new window
Length:
Date of creation: 31 Aug 1994
Date of revision:
Handle: RePEc:wbk:wbrwps:1349

Contact details of provider:
Postal: 1818 H Street, N.W., Washington, DC 20433
Phone: (202) 477-1234
Email:
Web page: http://www.worldbank.org/
More information through EDIRC

Related research

Keywords: Trade and Regional Integration; Environmental Economics&Policies; Trade Policy; Economic Theory&Research; TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT;

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Krueger, Anne O, 1992. "Government, Trade, and Economic Integration," American Economic Review, American Economic Association, vol. 82(2), pages 109-14, May.
  2. Lisa L. Martin, 1993. "International And Domestic Institutions In The Emu Process," Economics and Politics, Wiley Blackwell, vol. 5(2), pages 125-144, 07.
  3. Grossman, Gene M & Helpman, Elhanan, 1995. "The Politics of Free-Trade Agreements," American Economic Review, American Economic Association, vol. 85(4), pages 667-90, September.
  4. Grossman, G.M. & Helpman, E., 1992. "Protection for Sale," Papers 162, Princeton, Woodrow Wilson School - Public and International Affairs.
  5. Kemp, Murray C. & Wan, Henry Jr., 1976. "An elementary proposition concerning the formation of customs unions," Journal of International Economics, Elsevier, vol. 6(1), pages 95-97, February.
  6. Grossman, Gene M. & Helpman, Elhanan, 1995. "Trade Wars and Trade Talks," Scholarly Articles 3450062, Harvard University Department of Economics.
  7. Paul Krugman, 1991. "The move toward free trade zones," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 7-58.
  8. Lawrence Robert Z., 1994. "Regionalism: An Overview," Journal of the Japanese and International Economies, Elsevier, vol. 8(4), pages 365-387, December.
  9. David M. Gould & Graeme L. Woodbridge, 1993. "Retaliation, liberalization, and trade wars: the political economy of nonstrategic trade policy," Research Paper 9323, Federal Reserve Bank of Dallas.
  10. Finger, J. Michael, 1988. "Economists, institutions, and trade restrictions : a review article," Policy Research Working Paper Series 78, The World Bank.
  11. Krugman, Paul R, 1987. "Is Free Trade Passe?," Journal of Economic Perspectives, American Economic Association, vol. 1(2), pages 131-44, Fall.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Hoekman, Bernard & Primo Braga, Carlos, 1997. "Protection and Trade in Services: A Survey," CEPR Discussion Papers 1705, C.E.P.R. Discussion Papers.
  2. Kohler, Marion, 2002. "Coalition formation in international monetary policy games," Journal of International Economics, Elsevier, vol. 56(2), pages 371-385, March.
  3. Lewis, Jeffrey D. & Robinson, Sherman & Zhi Wang, 1995. "Beyond the Uruguay Round : the implications of an Asian free trade area," Policy Research Working Paper Series 1467, The World Bank.
  4. Robinson, Sherman & Lewis, Jeffrey D., 1996. "Partners or predators? : the impact of regional trade liberalization on Indonesia," Policy Research Working Paper Series 1626, The World Bank.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:1349. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.