DP1599 The Causes of Regionalism

Author(s): Richard Baldwin
Publication Date: March 1997
Keyword(s): Preferential Trade Arrangements, Regionalism, World Trade System
JEL(s): F01
Programme Areas: International Trade and Regional Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=1599

The traditional explanation of resurgence regionalism nations rests on two pillars. Regionalism is: (i) due to frustration with the WTO process (thought to be too cumbersome for today?s trade issues); and (ii) due to the United States? conversion from devoted multilateralist to ardent regionalist. This paper argues that the traditional explanation is inconsistent with the facts of North American and European regionalism. It also presents an alternative explanation based on a domino theory of regionalism. Namely, idiosyncratic shocks that deepen or widen regional integration trigger a multiplier or domino effect producing membership requests from countries that were previously happy to be non-members.