DP5775 Multilateralising Regionalism: Spaghetti Bowls as Building Blocs on the Path to Global Free Trade

Author(s):	Richard Baldwin
Publication Date:	August 2006
Keyword(s):	domino effect, juggernaut effect, multilateralism, regionalism, RTB unilateralism, trade
JEL(s):	F10, F13, F15, F2
Programme Areas:	International Trade and Regional Economics
Link to this Page:	cepr.org/active/publications/discussion_papers/dp.php?dpno=5775

This paper addresses the final steps to global free trade ? what they might look like, what sort of political economy forces might drive them, and what the WTO might do to guide them. Two facts form the point of departure: 1) Regionalism is here to stay; world trade is regulated by a motley assortment of unilateral, bilateral and multilateral trade agreements; 2) this motley assortment is not the best way to organise world trade. Moving to global duty-free trade will require a multilateralisation of regionalism. The paper presents the political economy logic of trade liberalisation and uses it to structure a narrative of world trade liberalisation since 1947. The logic is then used to project the world tariff map in 2010, arguing that the pattern will be marked by fractals ? fuzzy, leaky trade blocs made up of fuzzy, leaky sub-blocs (fuzzy since the proliferation of FTAs makes it impossible to draw sharp lines around the big-3 trade blocs, and leaky since some FTAs create free trade ?canals? linking the big-3 blocs). The paper then presents a novel political economy mechanism ? spaghetti bowls as building blocs ? whereby offshoring creates a force that encourages the multilateralisation of regionalism. Finally, the paper suggests three things the WTO could do to help.