The Economics of Regional Trading Arrangements

Regionalism became a major issue in international commercial diplomacy during the 1990s. The European Union's 1992 programme, the formation of NAFTA and attempts to form or strengthen regional trading arrangements in South America, southern Africa and Southeast Asia were viewed as a challenge to the nondiscrimination principle which was the cornerstone of the postwar international trading system. The Economics of Regional Trading Arrangements provides a unified analysis of policies which discriminate among trading partners combining in roughly equal proportions history, theory, and a review of empirical studies. - ;The Economics of Regional Trading Arrangements provides a unified analysis of policies which discriminate among trading partners. Regionalism became a major issue in international commercial diplomacy during the early 1990s. The proliferation of RTAs was viewed by some as a challenge, and by others as a complement, to the establishment of the World Trade Organization as the successor to GATT. This book analyses the new RTAs. It situates them in the broader realm of discriminatory trade polices for which there is a well-defined body of theory and empirical studies, before asking whether the new regionalism requires new theoretical analysis. The approach is to combine in roughly equal proportions history, theory, and a review of empirical studies. This is appropriate given the key theoretical result is the welfare ambiguity of discriminatory trade policy changes. Empirical studies can provide a sense of which of the potentially offsetting effects are more or less important. Since some effects may take a long time to have their full impact and may be systemic, it is also useful to observe how RTAs have evolved in practice. - ;"At a time when the world treaty system seems to be caught up in a burst of enthusiasm for preferential trading arrangements, Richard Pomfret's book is especially welcome. In my judgement, it provides the best analysis yet available of the economics of these arrangements" Anne O. Krueger, Stanford University -