Transcript GO 357 Intro - Colby College

GO 357
The Political Economy of
Regionalism
Walter Hatch
Colby College
Lecture One
Trend One

Economic activity increasingly
concentrated in regions
Europe
 North America
 Asia

Intra-Regional Exports
(US$ billion)
European
Union
North
America
East Asia
1985
353
143
49
1990
828
226
137
1996
1249
437
390
INTRA-REGIONAL TRADE
VALUE
1.E+09
9.E+08
8.E+08
7.E+08
6.E+08
1980
1990
5.E+08
2001
4.E+08
3.E+08
2.E+08
1.E+08
0.E+00
NAFTA
Other
Americas
Euro-12
Other
Europe
CIS
MENA
SSA
AsiaPacific
Trend Two

Proliferation and expansion of
regional trade agreements and
institutions
EU
 NAFTA, CAFTA, FTAA
 ASEAN, APEC, EAEC,

Growth in RTAs
(average number of notifications to GATT/WTO per year)
25
20
15
10
5
0
1948-94
1995-2000
Growth in RTAs
A World of Regions
Does regionalism undermine the
post-war
liberal international economic
order?
Liberal Economic Order
• General Agreement on Tariffs and Trade
(GATT)/ World Trade Organization (WTO)




GATT created in 1947; became WTO in 1995
150 members; one country = one vote
Multilateral approach via “most favored nation”
clause (non-discrimination)
Article 24 of GATT allows regional trade agreements –
but only if they eliminate or substantially reduce
barriers in virtually all sectors
• Bretton Woods system/IMF and World Bank


U.S. exercises veto power (17% of quota)
Discourages regional institutions
Views on Regionalism

Economists
• Some fret that regional negotiations jeopardize
multilateral negotiations
• Some gush that they serve as a stepping stone
on road to global trade regime

Political scientists
• Some see a safer world. Look at Europe.
• Some recall the 1930s: a world of inwardlooking blocs
Who else cares?
Anti-globalization activists
Regionalization as “mini-globalization,” more corporate power
Non-American Policy-makers
Regionalism as a check on IMF, WTO, US power
Defining Terms:
What’s a Region?

An area encompassing two or more relatively
proximate nations that have
• Shared sense of political or cultural identity and/or
• Potential for economic complementarity and/or
interdependency
Defining Terms Redux

Regionalization (an economic process)
market integration associated with the cross-border
flow of capital, labor, and technology within a
specific area or region

Regionalism (a political process)
cooperation among states to create institutions to
help bring about or support economic integration
in a region
Which comes first?
Who knows? (It doesn’t matter…)
Two Big Questions

Why do states agree to give up (or
pool) sovereignty?
• gains from trade?
• political power?
• shared identity?

Why do regional projects vary so
much (especially in terms of depth of
legalization/institutionalization)?
Hierarchy of RTAs

Preferential Trade Agreement

Free Trade Agreement

Customs Union

Common Market

Economic Union