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Regionalism and Multilateralism: How Are They Compatible?

— A Symmetrical Two-Sector Trading Block Model

  • Chapter
The Political Economy of Trade Integration

Part of the book series: Contributions to Economics ((CE))

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Abstract

Chapter I studies trade and welfare effects from regional integration. World trade is increasingly conducted between three trading blocks, but world welfare has not declined, as predicted by Krugman. His symmetrical trading block model is extended into a two-sector-model, where trade is beneficial through increased varieties and comparative advantage. Simulations confirm that:

  1. (i)

    regionalism and multilateralism can be compatible and welfare enhancing;

  2. (ii)

    sequential integration can monotonously increase world welfare;

  3. (iii)

    more dissimilar countries have higher potential benefits from integration;

  4. (iv)

    about one third of potential gains from free-trade under average tariffs are already realized in a system of three trading blocks.

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Authors and Affiliations

  1. International Monetary Fund, 700 19th Street, N. W., 20431, Washington, DC, USA

    Dr. Oliver Fratzscher

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  1. Dr. Oliver Fratzscher
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© 1996 Physica-Verlag Heidelberg

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Fratzscher, O. (1996). Regionalism and Multilateralism: How Are They Compatible?. In: The Political Economy of Trade Integration. Contributions to Economics. Physica-Verlag HD. https://doi.org/10.1007/978-3-642-61490-3_1

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  • DOI: https://doi.org/10.1007/978-3-642-61490-3_1

  • Publisher Name: Physica-Verlag HD

  • Print ISBN: 978-3-7908-0945-9

  • Online ISBN: 978-3-642-61490-3

  • eBook Packages: Springer Book Archive

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