Trade Blocs

More than one third of world trade occurs within actual or prospective trading blocs. This report attempts to understand the political economy of regional integration, the economic benefits and costs for developing countries, the policy choices confronting governments, and the implications of regionalism for nonmembers and the multilateral trading system. It evaluates the experience of existing regional integration agreements and to draw inferences from this for the tradeoffs faced by decisionmakers. The three main political arguments for membership are security, bargaining power and "lock in", or the effects of regional trade on domestic politics. Economic effects are divided between scale and competition and trade and location. Policy choices include: membership composition, stances toward external relations, depth of integration, and the range of activities or products covered by an agreement. The overall effect of regionalism on global free trade is also discussed.