Regional Trading Blocs in the World Economic System

by Jeffrey A. Frankel
October 1997
Book Description

The rapid growth of regional trading relationships in Europe, Asia, and Latin America has raised policy concerns about their impact on excluded countries and on the global trading system. Some observers worry that the multilateral system may be fracturing into discriminatory regional blocs. Others are hopeful that regional agreements will go beyond what was achieved in the Uruguay Round and instead become building blocks for further global liberalization and WTO rules in new areas. Jeffrey Frankel shows through extensive empirical analysis that the new breed of preferential trade arrangements are indeed concentrating trade regionally. He then assesses whether regional blocs are "natural" or "supernatural"—that is, whether they enhance or reduce global welfare. He concludes that a move to complete liberalization within blocs, with no reduction in barriers between blocs, would push the trading system into the supernatural zone of an excessive degree of regionalization. More balanced patterns of liberalization, however, give favorable outcomes. He considers regionalism at two levels: both the formal trading arrangements that are already in effect, and the broader continent-sized groupings that are under discussion (the Americas, Europe, and the Asia Pacific). Frankel's study also assesses the political and economic dimensions of regionalization and its implications for world economic prospects and public policy. In conclusion, Frankel proposes several policy prescriptions for pursuing partial regional liberalization among blocs as a stepping stone toward global free trade.



1. Introduction to Regional Trading Arrangements 226.9KB

2. Simple Measures of Regional Concentration in Trade 242.9KB

3. Importance of Geographical Proximity in Trade 223.3KB

4. The Gravity Model of Bilateral Trade 300.1KB

5. Estimated Effects of Trading Blocks 318.2KB

6. Extensions of the Empirical Analysis 321.5KB

7. A Model of Trade in Imperfect Substitutes with Intercontinental Transport Costs 262.6KB

8. Natural and Supernatural Trading Blocs 344.5KB

9. Has Regionalization Entered the Supernatural Zone? 240.3KB

10. A Political Economy Survey of Regionalism's Effect on Global Liberalization 241.5KB

11. Conclusions and Recommendations 215.5KB

Appendix A 332.0KB

Appendix B 175.8KB

Appendix C-D 213.1KB



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Book Data

October 1997
ISBN paper 0-88132-202-4
388 pp.

Commentaries on This Book

"... penetrating theoretical and empirical analysis ..."

Laura D'Andrea Tyson
former chair of the National Economic Council

"Once in a long while, an economist shows all of us how it's supposed to be done—how to combine innovative theory and ingenious empirical work to make sense of a truly important policy issue. Jeff Frankel's work on trading blocs does it all."

Paul Krugman
Stanford University

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