History, Geography and Regional Economic Integration

The switch from imperial to regional trade preferences has certainly raised the intra-regional share of some regions' trade, but the proliferation of regional integration agreements (RIAs) does not mean the regions of the world are becoming less outward oriented. This paper shows that, on the contrary, the share of GDP of each of the world's geographic regions that is traded extra-regionally has been growing steadily since its fall in the 1930s. The data also show the considerable extent to which the increase in trade within Western Europe has been at the expense of preferential trade with former colonies. This evidence thus adds further support to the view that regional and global economic integration have been occurring simultaneously and that RIAs have not reduced the economic welfare of outsiders as a group in an absolute sense (although the possibility remains that their welfare may have grown even faster if the RIAs had not formed).