Regional Integration Arrangements: Trading Blocs or Building Blocs?

Abstract

It is not easy to evaluate the impact of a regional agreement on trade liberalization. Such an evaluation is none the less necessary to assess the compatibility between regionalization and globalization. Some scenarios could be envisioned. The first refers to a world economy split into three largely autonomous trading regions with relatively low levels of interdependence (see Chapter 9). They would work to limit any exposure to the others, and links would be managed internally, by agreements and not by the markets. The consequences would be extensive trade protectionism and, ultimately, the three independent trade blocs might well supplant the WTO. There is another vision of interconnectedness between regional economies. One of the conditions for supporting this vision would be that the volume of imports by member countries from the rest of the world does not decline after the implementation of the agreement. Although the intensity of intraregional trade increases, so does the propensity of the RIAs to trade with the rest of the world. Thus, it is necessary to compare interregional and intraregional transactions. This chapter is devoted to this comparison, and analyses the issue of compatibility between regional integration and the WTO’s Article XXIV and Article V of GATS.