International Organisations in a World of Regional Trade Agreements: Lessons from Club Theory

This essay deals with the challenge that international organizations face at the turn of the millennium. The basic insight from the theory of clubs and information theory is that coordination and cooperation require dominant providers. Cooperation becomes more difficult as players become more equal in economic size. Today's environment is less conducive to cooperation than the environment after World War II. By extension, club theory suggests that Regional Trade Agreements are not flukes. They have proliferated because cooperation is feasible in smaller groups with a few larger players. There is a significant risk, however, that regional blocs may replace the multilateral cooperative process. To reduce this risk we propose the creation of an inter‐bloc international organization dedicated to reduce blocs' barriers to trade and finance.