Regionalism: Building Block or Stumbling Block?

Paper Summary:

This paper takes a balanced position with regards to the impact of regionalism on the international economic order (IEO). Regionalism can undermine and enhance the IEO. The paper first defines the terms regionalism and the international economic order. Second, the paper outlines key arguments that address the "building block vs. stumbling block" question on regionalism. Third, the paper turns to the empirical evidence to weigh the two sides of the argument. The final section provides concluding remarks.

From the Paper:

"The paper borrows the definition of regionalism from Winters (1997) as "loosely any policy designed to reduce trade barriers between a subset of countries regardless of whether those countries are actually contiguous or even close to each other." Furthermore, paper includes in the scope and coverage of regional trade agreements (RTA), both symmetric and asymmetric, free trade areas (FTA) and custom unions (CU). Regionalism and RTAs will be used interchangeably, while accounting for the considerable difference in scope, configuration, and timing of RTAs. The international economic order entails a multilateral arrangement to achieve trade liberalization and stable financial markets. One purpose of the order is to proximate free trade among all nations. Therefore an enhancement is further global liberalization, underlined by a most favored nation (MFN) principle. The means to this end are rule-based multilateral organizations such as the World Trade Organization. It emerges clearly from the definitions that precisely because RTAs are both a subset of liberalization and an exception to the MFN principle, regionalism can both enhance and undermine the IEO. How these elements play out is what will be explored below."

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