Regionalism
Regionalism, generally speaking, is a phenomenon in international trade where states create groups for the purposes of trade and to collectively reduce barriers of trade among the members of a group. Most of this phenomenon appears in the form of Regional Trade Agreements (RTA). These groups, like all trade regimes, vary greatly in terms of the scope of the goods that are covered, the institutional bylaws and guidelines of these agreements, etc. There is not a universal definition for regionalism due to disputes over the importance of geographic proximity and on the relationship between economic flows and policy choices. However, a region is often defined as a group of countries located in the same geographically specified area. An example which illustrates this is the African, Caribbean and Pacific Group of States which includes African, Caribbean, and Latin American nations. [1]
The incidence of regionalism has increased in recent history as the number of members in the GATT and WTO increased. This has generally been attributed to problems with the World Trade Organization. Small nations that are not part of the quad countries may engage in RTAs to enhance their power within the WTO. RTAs may also serve as alternatives among countries with similar trade policy goals when they cannot have their goals implemented through WTO negotiations.
There are two camps within international political economy that see regionalism as either an aid or an obstacle to global integration. Some decry the loss of multilateralism and a resulting division of the world into regional trade alliances. Others believe that regionalism encourages states to reduce trade barriers in an initially less painful manner, and thus helps states transition to a position where they are better suited to reduce trade barriers multilaterally. [2]
Sources and Implications of Regionalism
Although the recent proliferation of Preferential Trade Agreements has spurred interest in economic regionalism as opposed to multilateralism, up until now there has been no consensus as to the sources and implications of regionalism. However, Mansfield does highlight a few key findings:
1.) Preferences and political influence of different societal groups are likely to affect whether a country enters a Preferential Trade Agreement. Protectionist groups have an incentive to press for the establishment of PTA’s that discriminate in their favor and export-oriented interest may also support entering a PTA if doing so grants them access to vital foreign markets.
2.) Preferences of government officials and the nature of domestic institutions influence the establishment and economic effects of PTA’s. Although the specific institutional conditions that promote regionalism have not yet been established. Most recently, governments have opted to enter PTA's because doing so seemed likely to facilitate more extensive commercial liberalization than either unilateral or multilateral strategies.
3.) The formation and consequences of regional trade depend on the current political conditions. Although evidence suggests that PTA's became more pervasive following the end of hegemony, there is a lack of research on the welfare consequences of regionalism. Whereas earlier PTA's were often used by larger states to heighten the economic and political dependence of smaller states, recent trends regarding the links between PTA's and interstate power relations have been less widely analyzed.
4.) The period since WWII is the first to experience the growth of regionalism within the context of a multilateral trade system. Because there is considerable overlap between WTO membership and those who belong to a PTA, a debate exists as to whether PTA's complement WTO membership or whether regional and multilateral liberalization are substitutes.
5.) Preferential Trade Agreements have institutional differences including the number of members involved, the extent of preferential treatment, institutional density, and whether they impose a CET. There is currently a lack of evidence and theory regarding political conditions that shape the design of regional institutions as well as the political consequences of different institutions.
