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Returns to regionalism : an evaluation of nontraditional gains from regional trade agreements

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  • Fernandez, Raquel
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    Abstract

    The past decade has witnessed an explosion in the number of regional trade agreements. There seems to be a general, if ill-defined, belief on the part of many policymakers and academics that there is more to such agreements than the traditional gains from trade (thus the term"new regionalism"). The author examines several possible benefits that regional trade agreements may confer on their partners, including credibility, signaling, bargaining power, insurance, and a mechanism for coordination. She assesses the condtions necessary for each of these benefits, gives stylized examples of policies that might bring about those conditions, and discusses the plausibility of those conditions existing. In this light, she examines the North American Free Trade Agreement (NAFTA) and the European association agreements between the European Union and the countries in Central and Eastern Europe. She concludes that regional trade agreements can serve a useful economic purpose beyond the direct gains from tradeliberalization, by reducing uncertainties and improving credibility, and thus making it easier for the private sector to plan and invest. Indeed, reducing uncertainty may be essential for realizing gains from liberalization. Whether economies benefit from a particular regional trade agreements depends on the scope and coverage of its provisions, the nature of the enforcement mechanism, the circumstances in which the agreement can be amended, and changes in the behavioral incentives for various agents in the economy that result from it. It is important to examine these factors carefully and to evaluate the feasibility of freer trade in their absence when determining the effects of regional trade agreements on world welfare.

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    Bibliographic Info

    Paper provided by The World Bank in its series Policy Research Working Paper Series with number 1816.

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    Date of creation: 31 Aug 1997
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    Handle: RePEc:wbk:wbrwps:1816

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    Keywords: Environmental Economics&Policies; Economic Theory&Research; Payment Systems&Infrastructure; Rules of Origin; Labor Policies; Environmental Economics&Policies; Economic Theory&Research; Rules of Origin; TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT; Trade and Regional Integration;

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    References

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    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.:
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    1. Staiger, Robert W., 1995. "International rules and institutions for trade policy," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 29, pages 1495-1551 Elsevier.
    2. John Whalley, 1996. "Why Do Countries Seek Regional Trade Agreements?," NBER Working Papers 5552, National Bureau of Economic Research, Inc.
    3. Carlo Perroni & John Whalley, 2000. "The new regionalism: trade liberalization or insurance?," Canadian Journal of Economics, Canadian Economics Association, vol. 33(1), pages 1-24, February.
    4. Schiff, Maurice & Winters, L. Alan, 1997. "Regional Integration as Diplomacy," CEPR Discussion Papers 1690, C.E.P.R. Discussion Papers.
    5. repec:fth:coluec:9596-04 is not listed on IDEAS
    6. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-91, June.
    7. Kyle Bagwell & Robert W. Staiger, 1997. "Regionalism and Multilateral Tariff Cooperation," NBER Working Papers 5921, National Bureau of Economic Research, Inc.
    8. Maggi, G & Rodriguez-Clare, A, 1996. "The Value of Trade Agreements in the Presence of Political Pressures," Papers 180, Princeton, Woodrow Wilson School - Public and International Affairs.
    9. Hamilton, C.B. & Winters, L.A., 1992. "Opening Up International Trade in Eastern Europe," Papers 511, Stockholm - International Economic Studies.
    10. Staiger, Robert W & Tabellini, Guido, 1987. "Discretionary Trade Policy and Excessive Protection," American Economic Review, American Economic Association, vol. 77(5), pages 823-37, December.
    11. Wilfred J. Ethier, 1998. "Regionalism in a Multilateral World," Journal of Political Economy, University of Chicago Press, vol. 106(6), pages 1214-1245, December.
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    Cited by:
    1. Jahangir Khan Achakzai, 2010. "Unilateral Liberalization versus Regional Integration: The Case of ECO Member Countries," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 15(1), pages 27-44, Jan-Jun.
    2. Ugur, Mehmet, 2008. "Economic implications of Turkish EU membership: the advantages of tying one’s hands," MPRA Paper 18547, University Library of Munich, Germany, revised 2009.

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