Who Benefits And Who Loses From The Regionalization Of World Trade?

Abstract

As regional blocs evolve, developing countries within blocs are prime beneficiaries.  Trade between developed countries in different blocs falls relative to theoretical predictions.  Many developing countries outside major blocs are the losers.  The primary factor driving evolving trade patterns is the lowering of barriers to trade (however defined).  As economic integration progresses, a trade zone may evolve into a common market, economic union, or monetary union, facilitating the lowering of trade and growth-inhibiting frictions. Furthermore, barriers to trade will continue to decline within a trade zone faster than between trade zones, but the benefits of economic integration will not be equally shared across all nations in a zone.  Policy implications and directions for future research are then discussed.