Integration or Polarization? Regionalism in World Trade during the 1980s

Abstract

Does the increasing trend towards the conclusion of regional trade agreements conflict with the strengthening of the multilateral trade system? Has world trade become more regionalized as a consequence of such agreements? These are some of the recurrent questions that have been addressed by international economists and policy-makers during the 1980s. The successful conclusion of the Uruguay Round has taken away only some heat from this debate. As argued in the recent survey of De Melo and Panagariya (1994), ‘regionalism is back — and here to stay’. In Europe, the process of both widening and deepening the EU is likely to continue and has gained further momentum with the accession of many of the European Free Trade Area (EFTA) countries and the implementation of association agreements with both Eastern European and mediterranean countries. Similarly, in the Americas the ratification of NAFTA can act as catalyst for countries in the Western-hemisphere to sign free trade agreements with the USA. Finally, Asian countries are seriously considering the option of strengthening their trade links through preferential trade liberalization. Overall, the success of the later round of GATT negotiations can only reinforce the need to understand the link between regionalism and the multilateral trade system.

I am very grateful to Cecilia Testa for outstanding research assistance, and to Enzo Grilli and Fabrizio Onida for comments on an earlier draft. This chapter extends the results presented in earlier work for the Italian Institute of Foreign Trade.