DP1525 Regionalism versus Multilateralism
This paper examines the theoretical arguments and historical evidence about whether regionalism undermines the multilateral trading system. It first considers how to define multilateralism and then surveys over 60 recent contributions to the literature. It classifies theoretical models by four criteria: their assumed objective functions (national welfare versus pressure group interests); symmetric versus asymmetric models; one-off versus repeated games; and how they determine post-integration policies. It finds significant theoretical arguments and historical evidence on both sides of the debate. Very tentative conclusions include that regionalism may: help to liberalize very restrictive trade regimes; increase the vulnerability of less restrictive ones to break down; and be more likely to be harmful if governments are subject to sector-specific lobbying forces.
