The Proliferation of Regionalism: Motivations and Effects

Professor Crawford 2 " The ordinary means therefore to increase our wealth and treasure is by foreign trade, wherein we must ever observe this rule; to sell more to strangers yearly than we consume of theirs in value. " Thomas Mun, 1664. The movement of goods and services across borders has been a concern for as long as nation-states have existed. Now, in today's modern society of globalization, this concern has never been more prominent and real. The growing integration and compression of the world's peoples, places, and states, and the blurring of their territorial boundaries has been the subject of many recent debates. As countries open their economies and reduce protectionist barriers, disputes about the costs and benefits of trade have been brought to the surface. The scene of virtually every major meeting of international organizations regarding economic liberalization is now one of raging street battles and demonstrations. 1 The death of a protestor in Genoa in 2001 attests to the seriousness of advocators and protestors. Classical economic theory, dating back two centuries, promise production and welfare gains from trade and liberalization. Has something gone wrong? Recent years have brought about a proliferation in economic liberalization and free trade agreements around the globe. Even marginalized developing countries are participating in this phenomenon. Economic liberalization can occur in the form of multilateralism – such as negotiations made by the GATT – or regionalism. Not only has there been a trend for countries to reduce trade barriers on a global level, but there has been a surge in regional economic integration agreements. Countries are no longer only relying on international multilateral negotiations, but are initiating regional reductions of trade barriers. By the end of 1994, every country in the Western hemisphere, with the exception of Cuba, Dominican Republic, Haiti, Panama, and Surinam, was a member of a regional pact. 2 The focus of my paper will be on the emergence of these regional agreements. Why has there been a surge in regionalism? 3 Furthermore, what are the effects of these regional agreements, as compared to multilateral agreements? Economic integration may have significantly different implications for industrialized nations and less developed nations. Thus, I will examine the Western hemisphere as it contains both developed countries as well as Third World countries. Because early international trade theory is the foundation for present-day theory, I will begin my research by examining classical and neoclassical …