IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Continental Trading Blocs: Are They Natural, or Super-Natural?

  • Jeffrey A. Frankel
  • Ernesto Stein
  • Shang-Jin Wei

Using the gravity model, we find evidence of three continental trading blocs: the Americas, Europe and Pacific Asia. Intra-regional trade exceeds what can be explained by the proximity of a pair of countries, their sizes and GNP/capitas, and whether they share a common border or language. We then turn from the econometrics to the economic welfare implications. Krugman has supplied an argument against a three-bloc world, assuming no transport costs, and another argument in favor, assuming prohibitively high transportation costs between continents. We complete the model for the realistic case where intercontinental transport costs are neither prohibitive nor zero. If transport costs are low, continental Free Trade Areas can reduce welfare. We call such blocs super-natural. Partial liberalization is better than full liberalization within regional Preferential Trading Arrangements, despite the GATT's Article 24. The super-natural zone occurs when the regionalization of trade policy exceeds what is justified by natural factors. Estimates suggest that trading blocs like the current EC are super-natural.

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.nber.org/papers/w4588.pdf
Download Restriction: no

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4588.

as
in new window

Length:
Date of creation: Dec 1993
Date of revision:
Publication status: published as Frankel, J., E. Stein and S. J. Wei. "Trading Blocs And The Americas: The Natural, The Unnatural, And The Super-Natural," Journal of Development Economics, 1995, v47(1), 61-95.
Handle: RePEc:nbr:nberwo:4588
Note: ITI
Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Phone: 617-868-3900
Web page: http://www.nber.org
Email:


More information through EDIRC

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. Jeffrey A. Frankel, 1992. "Is Japan Creating a Yen Bloc in East Asia and the Pacific?," NBER Working Papers 4050, National Bureau of Economic Research, Inc.
  2. Wang, Z.K. & Winters, L.A., 1992. "The Trading Potential of Eastern Europe," Discussion Papers 92-21, Department of Economics, University of Birmingham.
  3. Baldwin, Richard, 1993. "A Domino Theory of Regionalism," CEPR Discussion Papers 857, C.E.P.R. Discussion Papers.
  4. Helpman, Elhanan, 1987. "Imperfect competition and international trade: Evidence from fourteen industrial countries," Journal of the Japanese and International Economies, Elsevier, vol. 1(1), pages 62-81, March.
  5. C. Fred Bergsten, 1991. "Commentary: the move toward free trade zones," Economic Review, Federal Reserve Bank of Kansas City, issue Nov, pages 27-35.
  6. Peter A. Petri, 1993. "The East Asian Trading Bloc: An Analytical History," NBER Chapters, in: Regionalism and Rivalry: Japan and the United States in Pacific Asia, pages 21-52 National Bureau of Economic Research, Inc.
  7. Anderson, James E, 1979. "A Theoretical Foundation for the Gravity Equation," American Economic Review, American Economic Association, vol. 69(1), pages 106-16, March.
  8. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-59, December.
  9. Jeffrey A. Frankel & Shang-Jin Wei, 1993. "Emerging Currency Blocs," NBER Working Papers 4335, National Bureau of Economic Research, Inc.
  10. Bhagwati, Jagdish N, 1971. "Trade-Diverting Customs Unions and Welfare Improvement: a Clarification," Economic Journal, Royal Economic Society, vol. 81(323), pages 580-87, September.
Full references (including those not matched with items on IDEAS)

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

When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:4588. 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: ()

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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.