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Making Regional Economic Integration Work

Author

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  • Agustin Carstens

    (International Monetary Fund, Washington, D.c.)

Abstract

The world has been witnessing a wave of regionalism in recent years. Preferential trade arrangements (PTAs) have been a central element of most regional agreements. This paper looks at the growing international experience with PTAs. It first provides some basic facts on the extent of regionalism and discusses the motives for entering into regional arrangements. This is followed by an analysis of the impact of PTAs on trade, growth, and welfare, based on traditional and new trade theories. Although the paper finds that empirical studies seem to conclude that in practice PTAs are not harmful or necessarily very beneficial, the main conclusion of the paper is that regional integration can work if done right, and can be pursued in parallel with, or as a stepping-stone towards, multilateral trade liberalisation. The paper provides four major recommendations to ensure that PTAs have a positive impact on member (and nonmember) countries. These include: (i) a large and diverse membership; (ii) continued reduction in external tariffs; (iii) comprehensive product coverage, with simple and transparent rules of origin; and (iv) effective implementation.

Suggested Citation

  • Agustin Carstens, 2004. "Making Regional Economic Integration Work," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 43(4), pages 335-352.
    • Handle: RePEc:pid:journl:v:43:y:2004:i:4:p:335-352
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    File URL: http://www.pide.org.pk/pdf/PDR/2004/4/PartI/Agustin.pdf
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    JEL classification:

    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General

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