Regional integration, old and new
After lying dormant for two decades, regional integration is on the rise. Recent initiatives suggest that the world trading system may be moving toward three trading blocs clustered around Japan, the European Community, and the United States. Some view this development as a move toward a less fragmented world trading system; others, as a threat to multilateralism. For a typical developing country, the issue is whether to enter into a regional integration arrangement or to choose unilateral trade liberalization. Two questions must be asked: Is a preferential approach likely to enhance economic efficiency? And are substantial benefits attainable more easily through regionalism or through unilateral trade liberalization? The authors address these issues first by reviewing past and recent regional integration arrangements. They note that recent arrangements are occurring in a more liberal trading environment than those in the past, and that developing countries are now seeking integration with developed country partners (for example, Mexico and the United States). So the context is different from past arrangements, when regional integration was viewed as an extension of import-substitution industrialization at the regional level. In a discussion of the welfare economics of preferential trading arrangements, they show that a preferential approach to trade liberalization may not increase welfare. For a small country, unilateral trade liberalization will be superior to a preferential approach unless the world divides into trading blocs with mutually high barriers - in which case, a preferential approach ensures market access. In a discussion of the welfare economics of trading blocs, they note that the move to a few trading blocs may make a cooperative solution more likely - at the same time increasing the rewards of noncooperative behavior if bargaining fails. With an empirical evaluation, the authors show that - after controlling for differences in investment - countries that integrated grew no faster than their comparator group. But human capital contributes significantly to growth, suggesting benefits from regional integration arrangements that emphasize cooperation. And there is evidence of catch-up, suggesting benefits for the least-developed members of the new wave of arrangements that emphasize North-South membership. In short, regional integration arrangements are more likely to be a stepping stone toward a freer world trading system if GATT rules are strengthened, and if developing countries enter into arrangements with developed rather than other developing countries.
|Date of creation:||31 Oct 1992|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (202) 477-1234
Web page: http://www.worldbank.org/
More information through EDIRC
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.:
- Langhammer, Rolf J. & Hiemenz, Ulrich, 1990. "Regional integration among developing countries : opportunities, obstacles and options," Open Access Publications from Kiel Institute for the World Economy 416, Kiel Institute for the World Economy (IfW).
- Lopez, Ramon & Panagariya, Arvind, 1992. "On the Theory of Piecemeal Tariff Reform: The Case of Pure Imported Intermediate Inputs," American Economic Review, American Economic Association, vol. 82(3), pages 615-25, June.
- Harry G. Johnson, 1965. "An Economic Theory of Protectionism, Tariff Bargaining, and the Formation of Customs Unions," Journal of Political Economy, University of Chicago Press, vol. 73, pages 256.
- Dan Ben-David, 1991. "Equalizing Exchange: A Study of the Effects of Trade Liberalization," NBER Working Papers 3706, National Bureau of Economic Research, Inc.
- 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.
- Paul Krugman, 1989. "Is Bilateralism Bad?," NBER Working Papers 2972, National Bureau of Economic Research, Inc.
- Fischer, Stanley, 1990. "Rules versus discretion in monetary policy," Handbook of Monetary Economics, in: B. M. Friedman & F. H. Hahn (ed.), Handbook of Monetary Economics, edition 1, volume 2, chapter 21, pages 1155-1184 Elsevier.
- Richard Baldwin, 1989. "The Growth Effects of 1992," NBER Working Papers 3119, National Bureau of Economic Research, Inc.
- Collier, Paul, 1979. "The Welfare Effects of Customs Union: An Anatomy," Economic Journal, Royal Economic Society, vol. 89(353), pages 84-95, March.
- de Melo, Jaime & Panagariya, Arvind & Rodrik, Dani, 1992.
"The New Regionalism: A Country Perspective,"
CEPR Discussion Papers
715, C.E.P.R. Discussion Papers.
- Eaton, Jonathan & Grossman, Gene M, 1986.
"Optimal Trade and Industrial Policy under Oligopoly,"
The Quarterly Journal of Economics,
MIT Press, vol. 101(2), pages 383-406, May.
- Jonathan Eaton & Gene M. Grossman, 1983. "Optimal Trade and Industrial Policy Under Oligopoly," NBER Working Papers 1236, National Bureau of Economic Research, Inc.
- Brecher, Richard A. & Diaz Alejandro, Carlos F., 1977. "Tariffs, foreign capital and immiserizing growth," Journal of International Economics, Elsevier, vol. 7(4), pages 317-322, November.
- C. A. Cooper & B. F. Massell, 1965. "Toward a General Theory of Customs Unions for Developing Countries," Journal of Political Economy, University of Chicago Press, vol. 73, pages 461.
- Wonnacott, Paul & Wonnacott, Ronald, 1984. "How General Is the Case for Unilateral Tariff Reduction?," American Economic Review, American Economic Association, vol. 74(3), pages 491, June.
- Corden, W M, 1972. "Economies of Scale and Customs Union Theory," Journal of Political Economy, University of Chicago Press, vol. 80(3), pages 465-75, May-June.
- Ian Wooton, 1988. "Towards a Common Market: Factor Mobility in a Customs Union," Canadian Journal of Economics, Canadian Economics Association, vol. 21(3), pages 525-38, August.
- Faini, Riccardo & de Melo, Jaime & Senhadji-Semlali, Abdel & Stanton, Julie, 1990.
"Growth oriented adjustment programs : a statistical analysis,"
Policy Research Working Paper Series
426, The World Bank.
- Faini, Riccardo & De Melo, Jaime & Senhadji, Abdelhak & Stanton, Julie, 1991. "Growth-oriented adjustment programs: A statistical analysis," World Development, Elsevier, vol. 19(8), pages 957-967, August.
- Robert J. Barro & Xavier Sala-i-Martin, 1990. "Economic Growth and Convergence across The United States," NBER Working Papers 3419, National Bureau of Economic Research, Inc.
- Wonnacott, Paul & Wonnacott, Ronald, 1981. "Is Unilateral Tariff Reduction Preferable to a Customs Union? The Curious Case of the Missing Foreign Tariffs," American Economic Review, American Economic Association, vol. 71(4), pages 704-14, September.
- Bhagwati, Jagdish, 1990. "Departures from Multilateralism: Regionalism and Aggressive Unilateralism," Economic Journal, Royal Economic Society, vol. 100(403), pages 1304-17, December.
- Riezman, Raymond, 1979. "A 3 x 3 model of customs unions," Journal of International Economics, Elsevier, vol. 9(3), pages 341-354, August.
When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:985. 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: (Roula I. Yazigi)
If references are entirely missing, you can add them using this form.