Mansfried and Milner (1999)

The New Wave of Regionalism
Author(s): Edward D. Mansfield and Helen V. Milner

Source: International Organization, Vol. 53, No. 3 (Summer, 1999), pp. 589-627
Published by: The MIT Press
Stable URL: http://www.jstor.org/stable/2601291 .
Accessed: 29/09/2013 21:54
Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at .
http://www.jstor.org/page/info/about/policies/terms.jsp
.
JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of
content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms
of scholarship. For more information about JSTOR, please contact support@jstor.org.
The MIT Press is collaborating with JSTOR to digitize, preserve and extend access to International
Organization.
http://www.jstor.org
This content downloaded from 148.61.13.133 on Sun, 29 Sep 2013 21:54:34 PM

All use subject to JSTOR Terms and Conditions
The New Wave ofRegionalism
EdwardD. Mansfieldand Helen V. Milner
Introduction
Economicregionalism appearsto be growingrapidly.Whythishas occurredand

whatbearingit will have on theglobal economyare issues thathave generated
considerableinterest
anddisagreement. Some observers fearthatregionaleconomic
as theEuropeanUnion(EU), theNorth
institutions-such American FreeTradeAgree-
ment(NAFTA),Mercosur, andtheorganization ofAsia-Pacific
EconomicCoopera-
tion(APEC)-will erodethemultilateral systemthathas guidedeconomicrelations
sincetheend ofWorldWarII, promoting protectionismand conflict.
Othersargue
willfostereconomicopennessandbolsterthemultilateral
thatregionalinstitutions
system.Thisdebatehas stimulated a largeandinfluential
bodyofresearch byecono-
mistson regionalism'swelfareimplications.
Economicstudies,however, generally placelittleemphasison thepoliticalcondi-
tionsthatshaperegionalism. Lately,manyscholarshave acknowledged thedraw-
backsof suchapproachesandhavecontributed to a burgeoning thatsheds
literature
new lighton how politicalfactorsguidetheformation of regionalinstitutions
and
theireconomiceffects.Ourpurposeis toevaluatethisrecentliterature.
Muchof theexistingresearchon regionalism centerson internationaltrade(al-
thoughefforts havealso beenmadeto analyzecurrency markets, capitalflows,and
otherfacetsofinternational
economicrelations).1 Variousrecentstudiesindicatethat
whether stateschooseto enterregionaltradearrangements andtheeconomiceffects
ofthesearrangements dependon thepreferences ofnationalpolicymakers andinter-
estgroups,as wellas thenatureandstrength ofdomesticinstitutions.Otherstudies
focuson internationalpolitics,emphasizing how powerrelationsand multilateral
Forhelpfulcomments on earlierdrafts to David Baldwin,PeterGoure-

of thisarticle,we aregrateful
vitch,StephanHaggard,PeterJ.Katzenstein, David A. Lake,RandallL. Schweller, BethV. Yarbrough,
andthreeanonymous reviewers.In conductingthisresearch, Mansfieldwas assistedby a grantfromthe
Ohio StateUniversityOfficeofResearchandbytheHooverInstitution at Stanford
University,wherehe
was a NationalFellowduring1998-99.
1. On thisissue,see Cohen1997;Lawrence1996;andPadoan1997.
International
Organization
53, 3, Summer1999,pp. 589-627
? 1999byTheIO FoundationandtheMassachusetts Institute
ofTechnology

590 International
Organization
institutions
affecttheformation ofregionalinstitutions,
theparticularstatescompos-
ingthem,and theirwelfareimplications. We arguethattheseanalysesprovidekey
insights
intoregionalism'scausesandconsequences. Theyalso demonstrate therisks
associatedwithignoringitspoliticalunderpinnings.At thesametime,however, re-
centresearchleavesvariousimportant theoretical
and empiricalissuesunresolved,
includingwhichpoliticalfactors bearmostheavilyon regionalism andthenatureof
theireffects.
The resolutionoftheseissuesis likelytohelpclarify thenew "wave" of
whether
regionalismwillbe benignor malign.2 The contemporary spreadof regionaltrade
arrangementsis notwithouthistoricalprecedent.
Sucharrangements promoted com-
mercialopennessduringthenineteenth buttheyalso contributed
century, to eco-
nomicinstabilitythroughouttheerabetweenWorldWarsI andII. Underlying many
debatesaboutregionalism is whether thecurrentwave willhavea benigncast,like
thewavethataroseduringthenineteenth ora maligncast,liketheone that
century,
emergedduringtheinterwar period.Here,we arguethatthepoliticalconditions
surroundingthecontemporary episodeaugurwell foravoidingmanyof regional-
ism's moreperniciouseffects, althoughadditionalresearchon thistopicis sorely
needed.
We structureouranalysisaroundfourcentralquestions.First,whatconstitutes a
regionandhow shouldregionalism be defined?Second,whyhas thepervasiveness
ofregionaltradearrangements waxedandwanedovertime?Third,whydo countries
pursueregionaltradestrategies,insteadofrelying
solelyonunilateral ormultilateral
ones;andwhatdetermines theirchoiceofpartners inregionalarrangements? Fourth,
whatarethepoliticalandeconomicconsequencesofcommercial regionalism?
Regionalism:An ElusiveConcept
Extensivescholarlyinterestin regionalismhas yetto generatea widelyaccepted

definition
of it.Almostfifty yearsago, JacobVinercommented that"economists
haveclaimedtofinduse intheconceptofan 'economicregion,'butitcannotbe said
thattheyhavesucceededinfinding ofitwhichwouldbe ofmuchaid ...
a definition
in decidingwhether twoor moreterritories werein thesame economicregion."3
Since then,neithereconomistsnorpoliticalscientistshave made muchheadway
towardsettlingthismatter.4
Disputesoverthedefinition of an economicregionandregionalism hingeon the
importanceofgeographic proximity betweeneconomicflows
andontherelationship
andpolicychoices.A regionis oftendefinedas a groupof countrieslocatedin the
samegeographically specified
area.Exactlywhichareasconstituteregions,
however,
2. Bhagwatidistinguishes two waves of regionalism

sinceWorldWarII. The firstbeganin thelate
1950sandlasteduntilthe1970s;thesecondbeganinthemid-1980s.Thesewavesarediscussedatgreater
lengthlaterin thisarticle.See Bhagwati1993.
3. Viner1950,123.
4. On thisissue,see Katzenstein 1997a,8-11.

NewWaveofRegionalism 591
remainscontroversial. Some observers, forexample,considerAsia-Pacifica single

region,othersconsideritan amalgamation oftworegions, andstillothersconsiderit
a combination of morethantworegions.Furthermore, a regionimpliesmorethan
just close physicalproximity amongtheconstituent states.The UnitedStatesand
Russia,forinstance, arerarely considered inhabitantsofthesameregion,eventhough
Russia's easterncoast is veryclose to Alaska. Besides proximity, manyscholars
insistthatmembers ofa commonregionalso sharecultural, economic,linguistic, or
politicalties.5Reflecting thisposition,KymAndersonandHege Norheimnotethat
"whilethereis no ideal definition [ofa region],pragmatism wouldsuggestbasing
thedefinition onthemajorcontinents andsubdividing themsomewhat according toa
combination ofcultural, language,religious, andstage-of-development criteria."6
Variousstudies,however, defineregionslargelyin termsof thesenongeographic
criteria andplacerelatively littleemphasisonphysicallocation.Forexample,France
andtheFrancophone countries ofNorthwest Africaareoftenreferred toas a regional
groupingbecause of theirlinguisticsimilarities. Also, social constructivistshave
arguedthatcountries sharinga communalidentity comprisea region,regardless of
theirlocation.7 In thelattervein,PeterJ.Katzenstein maintains thatregional"geo-
graphicdesignations are not 'real,' 'natural,'or 'essential.'Theyare sociallycon-
structed andpolitically contested andthusopento change."8Morecommonamong
scholarswhodefineregionsin nongeographic termsis a focuson preferential eco-
nomicarrangements, whichneednotbe composedof statesin close proximity (for
example,theUnitedStates-Israel FreeTradeAreaandtheLome Convention).
Settingasidetheissueofhowa regionshouldbe defined, questionsremainabout
whether regionalism pertainsto theconcentration of economicflowsor to foreign
policycoordination. Some analysesdefineregionalismas an economic process
whereby economicflows growmorerapidlyamonga givengroupof states(in the
sameregion)thanbetweenthesestatesandthoselocatedelsewhere. An increasein
intraregional flowsmay stemfromeconomicforces,like a higheroverallrateof
growth withinthanoutsidetheregion,as wellas fromforeign economicpoliciesthat
liberalizetradeamongtheconstituent statesanddiscriminate againstthirdparties.9
In a recentstudy, AlbertFishlowand StephanHaggardsharplydistinguish be-
tweenregionalization, whichrefers totheregionalconcentration ofeconomicflows,
andregionalism, whichtheydefineas a political processcharacterized byeconomic
policycooperation andcoordination amongcountries. 10Definedinthisway,commer-
cial regionalism has beendrivenlargelybytheformation andspreadofpreferential
tradingarrangements (PTAs). These arrangements furnish stateswithpreferential
accesstomembers' markets (forexample, theEuropeanEconomicCommunity [EEC]/
5. See, forexample,Deutschetal. 1957;Nye 1971;Russett1967;andThompson1973.

6. Anderson andNorheim1993,26.
7. Forexample,Kupchan1997.
-8. Katzenstein 1997a,7.
9. See, forexample,Krugman1991a; andFrankel,Stein,andWei 1995.Of course,regionalismmay
stemfroma combination ofeconomicandpoliticalforcesas well.
10. FishlowandHaggard1992.See also Haggard1997,48 fn.1; andYarbroughandYarbrough 1997,
160fn.1.

592 International
Organization
EuropeanCommunity [EC]/European Union[EU],theEuropeanFreeTradeAssocia-

tion[EFTA],NAFTA,andtheCouncilforMutualEconomicAssistance[CMEA]);
manyofthemalso coordinate members' third
tradepoliciesvis-'a-vis parties.11
Among
thevarioustypesofPTAsarecustomsunions,whicheliminate tradebarriers
internal
andimposea commonexternal (CET); freetradeareas(FTAs),whicheliminate
tariff
internal butdo notestablisha CET; andcommonmarkets,
tradebarriers, whichallow
thefreemovement of factorsof production and finished productsacrossnational
borders.
12
Since muchof thecontemporary literatureon regionalismfocuseson PTAs,we

willemphasizetheminthefollowing consider
analysis.13Existingstudiesfrequently
PTAsas a group,rather amongthevarioustypesofthesearrange-
thandifferentiating
mentsordistinguishingbetweenbilateralarrangements andthosecomposedofmore
thantwo parties.To cast our analysisas broadlyas possible,we do so as well,
although someoftheinstitutionalvariationsamongPTAs willbe addressedlaterin
thisarticle.
EconomicAnalysesofRegionalism
Muchoftheliterature on regionalism focuseson thewelfareimplications ofPTAs,

bothformembers andtheworldas a whole.Developedprimarily byeconomists, this
researchservesas a pointofdeparture forthefollowing analysis,so we nowturntoa
briefsummary ofit.Preferential trading arrangements havea two-sided lib-
quality,
eralizingcommerceamongmemberswhilediscriminating againstthirdparties.14
Since sucharrangements rarelyeliminateexternaltradebarriers, economistscon-
sidertheminferior toarrangements thatliberalizetradeworldwide. Justhowinferior
PTAs are hingeslargelyon whethertheyare tradecreatingor tradediverting, a
distinction
originallydrawnbyViner.As he explained:
Therewillbe commodities . .. forwhichone ofthemembers ofthecustoms
unionwillnownewlyimport fromtheotherbutwhichitformerly didnotimport
at all becausethepriceoftheprotected domesticproductwas lowerthanthe
priceat anyforeign sourceplustheduty.Thisshiftin thelocusofproduction as
betweenthetwocountries is a shiftfroma high-cost
to a low-costpoint....
Therewillbe othercommodities whichone ofthemembers ofthecustomsunion
willnownewlyimport fromtheotherwhereasbeforethecustomsunionitim-
portedthemfroma thirdcountry, becausethatwas thecheapestpossiblesource
11. See, forexample,Bhagwati1993; Bhagwatiand Panagariya1996,4-5; de Melo and Panagariya

1993;andPomfret 1988.
12. See Anderson andBlackhurst 1993;andthesourcesinfootnote11,above.
13. In whatfollows,we referto regionalarrangementsandPTAsinterchangeably,whichis consistent
withmuchoftheexisting on regionalism.
literature
14. As de Melo andPanagariya pointout,"becauseunderregionalism
preferences
areextendedonlyto
partners,itis discriminatory.
Atthesametimeitrepresents a movetowardsfreertradeamongpartners."
de Melo andPanagariya1993,4.

oftheduty.The shiftinthelocusofproduction
ofsupplyevenafterpayment is
nownotas betweenthetwomember countriesbutas betweena low-costthird
andtheother,
country member
high-cost, country.15
Vinerdemonstrated thata customsunion'sstaticwelfareeffects on members and
theworldas a wholedependon whether itcreatesmoretradethanit diverts. In his
words,"Wherethetrade-creating forceis predominant, one ofthemembers at least
mustbenefit, bothmaybenefit, thetwocombinedmusthave a netbenefit, and the
worldat largebenefits....Wherethetrade-diverting effectis predominant, one at
leastof themembercountries is boundto be injured,bothmaybe injured,thetwo
combinedwillsuffer a netinjury, andtherewillbe injurytotheoutsideworldandto
theworldat large."16 Vineralso demonstrated thatitis verydifficult to assessthese
effects
on anything otherthana case-by-case basis.Overthepastfifty years,a wide
varietyof empiricalefforts have been madeto determine whether PTAs are trade
creatingortradediverting.As we discusslater,thereis widespread consensusthatthe
preferential
arrangements forgedduringthenineteenth century tendedto be trade
creatingandthatthoseestablished betweenWorldWarsI andII tendedto be trade
diverting;however, thereis a strikinglackofconsensuson thisscoreaboutthePTAs
developedsinceWorldWar11.17
Evenifa PTAis tradediverting, itcan nonetheless enhancethewelfareofmem-
bersbyaffecting theirtermsoftradeandtheircapacitytorealizeeconomiesofscale.
Forminga PTA typically improvesmembers'termsoftradevis-'a-vis therestofthe
world,sincethearrangement almostalwayshasmoremarket powerthananyconstitu-
entparty. At thesametime,however,Paul Krugmanpointsoutthatattempts by a
PTAtoexploititsmarket powermaybackfire ifothersucharrangements exist,since
"theblocsmaybeggareachother. Thatis, formation ofblocscan,in effect, setoffa
beggar-alltradewarthatleaveseveryone worseoff."18 He arguesthatthesebeggar-
thy-neighbor effectsare minimizedwhenthenumberof tradeblocs is eithervery
largeor verysmall.19 The existenceof a singleglobalbloc is equivalentto a free-
tradesystem, whichobviouslypromotes bothnationalandglobalwelfare. In a world
composedofmanysmallblocs,littletradediversion is expectedbecausetheoptimal
foreachblocis quitelow andthedistortionary
tariff effectofa tariffimposedbyany
oneis minimal. By contrast, Krugman claimsthata system ofthreeblocscanhavean
especiallyadverseimpacton globalwelfare.Underthesecircumstances, each bloc
has somemarket power,thepotential flowofinterbloc commerce is substantial, and
tradebarriersmarkedly distortsuchcommerce.
15. Viner1950,43. Forcomprehensive overviewsoftheissuesaddressedin thissection,see Baldwin

andVenables1995; Bhagwati1991,chap.5; Bhagwatiand Panagariya1996; Gunter1989; Hine 1994;
andPomfret 1988.
16. Viner1950,44.
17. One reasonforthelack of consensuson thisissueis thedearthof reliableinformationaboutthe
degreetowhichpricechangesinducesubstitution acrossimports fromdifferent Another
suppliers. reason
counterfactuals
associatedwithconstructing
is thedifficulty (or "antimondes") thatadequatelygaugethe
effectsofPTAs.On theseissues,see Hine 1994;andPomfret 1988,chap.8.
18. Krugman1991a,16.
19. See ibid.;andKrugman1993,61.

594 International
Organization
Consistent withthisproposition, a seriesof simulationsby Jeffrey A. Frankel,

ErnestoStein,andShang-Jin Weirevealthatworldwelfareis reducedwhentwoor
threePTAs exist,dependingon theheightof theexternaltariffs of each arrange-
ment.20T. N. SrinivasanandEricBondandConstantinos Syropoulos, however, have
theassumptions
criticized underlying Krugman'sanalysis.2'In addition,variousob-
servershavearguedthatthestaticnatureofhismodellimitsitsabilitytoexplainhow
PTAs expandand thewelfareimplications These debatesfurther
of thisprocess.22
reflectthedifficulty thateconomistshave had drawinggeneralizations aboutthe
welfareeffects ofPTAs.As one recentsurveyconcludes,"analysisof thetermsof
tradeeffectshastendedtowardthesamedepressing ambiguityas therestofcustoms
uniontheory."23
A regionaltradearrangement can also influencethewelfareofmembers byallow-
ingfirms to realizeeconomiesof scale. Overthreedecadesago,JagdishBhagwati,
CharlesA. CooperandBentonF. Massell,andHarryJohnson foundthatstatescould
reducethecostsof achievinganygivenlevelofimport-competing industrialization
byforming a PTAwithin whichscaleeconomiescouldbe exploited andthendiscrimi-
natingagainstgoodsemanating fromoutsidesources.24 Indeed,thismotivation con-
tributedtothespateofPTAsestablished bylessdevelopedcountries (LDCs) through-
out the 1960s.25More recentstudieshave examinedhow scale economieswithin
regionalarrangements canfoster greater andcompetition
specialization andcan shift
thelocationofproduction amongmembers.26 Although theseanalysesindicatethat
PTAs could yieldeconomicgainsformembersand adverselyaffectthirdparties,
theyalso underscore regionalism's uncertain welfareimplications.27
Besidesitsstaticwelfareeffects, economists havedevotedconsiderable attention
to whether regionalism willaccelerateorinhibitmultilateral tradeliberalization,an
issuethatBhagwatirefers to as "thedynamictime-path question."28Severalstrands
of researchsuggestthatregionaleconomicarrangements mightbolstermultilateral
openness.First,MurrayC. KempandHenryWanhavedemonstrated thatitis pos-
sibleforanygroupofcountries to establisha PTAthatdoes notdegradethewelfare
of eithermembers orthirdparties,and thatincentives existfortheunionto expand
untilitincludesall states(thatis, untilglobalfreetradeexists).29Second,Krugman
andLawrenceH. Summersnotethatregionalinstitutions reducethenumberofac-
torsengagedinmultilateral negotiations, therebymutingproblems ofbargaining and
collectiveactionthatcan hampersuchnegotiations.30 Third,thereis a widespread
20. Frankel, Stein,andWei 1995.

21. See BondandSyropoulos1996a;andSrinivasan1993.
22. See BhagwatiandPanagariya1996,47;andSrinivasan1993.
23. Gunter1989,16.See also BaldwinandVenables1995,1605.
24. See Bhagwati1968;CooperandMassell 1965a,b;andJohnson1965.
25. Bhagwati1993,28.
26. See, forexample,Krugman1991b;andPadoan1997,108-109.
27. See BaldwinandVenables1995,1605-13;andGunter1989,16-21.
28. See Bhagwati1993;andBhagwatiandPanagariya1996.
29. KempandWan1976.
30. See Krugman1993;andSummers1991.

beliefthatregionaltradearrangements
caninducemembers andconsoli-
toundertake
dateeconomicreforms andthatthesereforms
arelikelytopromote
multilateral
open-
ness.31
However,clearlimitsalso existon theabilityof regionalagreements to bolster
multilateralism. Bhagwati, forexample,maintains thatalthough theKemp-Wan theo-
remdemonstrates thatPTAscouldexpanduntilfreetradeexists,thisresultdoes not
specifythelikelihoodof suchexpansionorthatitwilloccurin a welfare-enhancing
way.32 In addition, BondandSyropoulosarguethattheformation ofcustomsunions
mayrendermultilateral tradeliberalizationmoredifficult by undercutting multilat-
eralenforcement.33 ButKyleBagwellandRobertStaigershowthatPTAshavecon-
tradictory effects ontheglobaltrading system. Theyclaimthat"therelativestrengths
ofthese.. . effects determinetheimpactofpreferential agreement on thetariff
struc-
tureunderthemultilateral agreement, and ... preferentialtradeagreements can be
eithergood or bad formultilateral tariff
cooperation,dependingon the param-
eters."34Theydo conclude,however, that"it is preciselywhenthemultilateral sys-
temis workingpoorlythatpreferential agreements can have theirmostdesirable
effectson themultilateral system."35
Economicanalysesindicatethatregionalism's welfareimplications have varied
starkly overtimeandacrossPTAs.As FrankelandWeiconclude,"regionalism can,
depending on thecircumstances, be associatedwitheithermoreorless generalliber-
alization."36 In whatfollows,we arguethatthesecircumstances involvepolitical
conditions thateconomicstudiesoftenneglect.Regionalism can also haveimportant
politicalconsequences, andthey, too,havebeengivenshortshrift inmanyeconomic
studies.Lately,theseissueshave attracted growinginterest, sparking a burgeoning
literatureon thepoliticaleconomyof regionalism. We assess thisliterature after
conducting a briefoverviewofregionalism's historical
evolution.
Regionalismin HistoricalPerspective
Considerable has beenexpressedin howthepreferential

interest economicarrange-
mentsformedafterWorldWarII have affected and will subsequentlyinfluence the
globaleconomy. We focusprimarily on thiseraas well;however,itis widelyrecog-
nizedthatregionalismis notjusta recentphenomenon. Analysesofthecurrent spate
of PTAs oftendrawon historical analogiesto priorepisodesof regionalism. Such
analogiescan be misleadingbecausethepoliticalsettings in whichtheseepisodes
arosearequitedifferentfromthecurrent To developthispoint,itis usefulto
setting.
31. See, forexample,Lawrence1996;andSummers1991.

32. Bhagwati1991,60-61; and 1993.
33. BondandSyropoulos1996b.
34. BagwellandStaiger1997,27.
35. Ibid.,28.
36. FrankelandWei 1998,216.

596 International
Organization
beginbydescribing eachofthefourwavesofregionalism thathavearisenoverthe

pasttwocenturies.
The initialepisodeoccurredduringthesecondhalfofthenineteenth century and
was largelya Europeanphenomenon.37 Throughout thisperiod,intra-Europeantrade
bothrosedramatically a vastportionof globalcommerce.38
and constituted More-
over,economicintegration became sufficientlyextensivethat,by theturnof the
twentieth century,Europehad begunto function as a singlemarketin manyre-
spects.39The industrialrevolutionand technological advancesattendant to it that
interstate
facilitated commerce clearlyhadpronounced effectson Europeanintegra-
tion;butso didthecreationofvariouscustomsunionsandbilateral tradeagreements.
Besides thewell-known GermanZollverein,theAustrianstatesestablisheda cus-
tomsunionin 1850,as did Switzerland in 1848,Denmarkin 1853,andItalyin the
1860s. The lattercoincidedwithItalianstatehood, notan atypicalimpetusto the
of a PTA in thenineteenth
initiation century.In addition, variousgroupsof nation-
statesforgedcustomsunions,including SwedenandNorwayandMoldaviaandWal-
lachia.40
The development of a broadnetworkof bilateralcommercialagreements also
contributed to the growthof regionalismin Europe.Precipitated by the Anglo-
Frenchcommercial treatyof 1860,theywerelinkedbyunconditional most-favored-
nation(MFN) clausesandcreatedthebedrockoftheinternational economicsystem
untilthedepression inthelatenineteenth Furthermore,
century.41 thedesirebystates
outsidethiscommercial network togaingreateraccesstothemarkets ofparticipants
stimulatedits rapidspread.As of thefirstdecade of thetwentieth century, Great
Britainhadconcludedbilateral arrangements withforty-six
states,Germany haddone
so withthirty countries,and Francehad done so withmorethantwentystates.42
These arrangements contributedheavilyto theunprecedentedgrowthof European
integrationandtotherelatively openinternational
commercialsystem thatcharacter-
ized thelatterhalfof thenineteenth century,underpinningwhatDouglasA. Irwin
referstoas an eraof "progressivebilateralism."43
WorldWarI disrupted thegrowthof regionaltradearrangements. But a second
waveofregionalism, whichhada decidedlymorediscriminatory castthanitsprede-
cessor,begansoonafterthewarended.The regionalarrangements formed between
37. See, forexample,Kindleberger 1975; and Pollard1974.However,regionalism was notconfined

solelyto Europeduringthisera.Priorto 1880,forexample,India,China,andGreatBritaincomprised a
"tightly-knit bloc" inAsia.Afterward,
trading Japan'seconomicdevelopment anditsincreasingpolitical
powerledtokeychangesinintra-Asian tradepatterns.KenwoodandLougheedreport that"Asia replaced
EuropeandtheUnitedStatesas themainsourceofJapaneseimports, supplyingalmostone-halfofthese
needsby 1913.By thatdateAsia hadalso becomeJapan'sleadingregionalexportmarket." Kenwoodand
Lougheed1971,94-95.
38. Pollard1974,42-51, 62-66.
39. Kindleberger 1975;andPollard1974.Ofcourse,tradegrewrapidlyworldwide duringthisera,but
theextent ofitsgrowth andofeconomicintegration was especiallymarkedinEurope.
40. See Irwin1993,92; andPollard1974,118.
41. See, forexample,Irwin1993;KenwoodandLougheed1971;andPollard1974.
42. Irwin1993,97.
43. Ibid.,114.See also Pollard1974,35.

WorldWarsI andII tendedtobe highlypreferential. Some werecreatedto consoli-

datetheempiresofmajorpowers,including thecustomsunionFranceformed with
members ofitsempirein 1928andtheCommonwealth systemofpreferences estab-
lishedby GreatBritainin 1932.44Most,however,wereformedamongsovereign
states.For example,Hungary, Romania,Yugoslavia,and Bulgariaeach negotiated
tariff
preferences on theiragriculturaltradewithvariousEuropeancountries. The
RomeAgreement of 1934led totheestablishment ofa PTAinvolving Italy,Austria,
and Hungary. Belgium,Denmark,Finland,Luxembourg, theNetherlands, Norway,
andSwedenconcludeda seriesofeconomicagreements throughoutthe1930s.Ger-
manyalso initiatedvariousbilateraltradeblocs duringthisera.Outsideof Europe,
theUnitedStatesforgedalmosttwodozenbilateralcommercial agreements during
themid-1930s,manyofwhichinvolvedLatinAmericancountries.45
Longstanding andunresolved debatesexistaboutwhether regionalism deepened
theeconomicdepression oftheinterwar periodandcontributed topoliticaltensions
culminating in WorldWar11.46Contrasting thisera withthatpriorto WorldWarI,
Irwinpresents theconventional view: "In thenineteenthcentury,a network oftrea-
tiescontainingthemostfavorednation(MFN) clausespurred majortariffreductions
in Europeand aroundtheworld,[ushering] in a harmoniousperiodof multilateral
free trade thatcompares favorablywith . . . the recentGATT era. In the interwar
period,by contrast, discriminatorytradeblocs and protectionistbilateralarrange-
mentscontributed to the severecontraction of worldtradethataccompaniedthe
GreatDepression."47 The latterwave of regionalism is oftenassociatedwiththe
pursuitof beggar-thy-neighbor policiesand substantial tradediversion, as well as
heightened politicalconflict.
Scholarsfrequently attribute
theriseofregionalism duringtheinterwar periodto
states'inability solutionsto economicproblems.As A. G.
to arriveat multilateral
KenwoodandA. L. Lougheednote,"The failureto achieveinternational agreement
on matters oftradeandfinancein theearly1930sled manynationsto considerthe
alternative
possibilityoftradeliberalizing
agreements on a regionalbasis."48In part,
amongthemajorpowersandtheuse of
thisfailurecanbe tracedtopoliticalrivalries
regionaltradestrategies by thesecountries formercantilist purposes.49Hence,al-
thoughregionalism was notnew,boththepoliticalcontextin whichit aroseandits
consequences werequitedifferentthanbeforeWorldWarI.
44. Pollard1974,145.
45. On thecommercialarrangements discussedin thisparagraph, see Condliffe1940, chaps. 8-9;
Hirschman [1945] 1980;KenwoodandLougheed1971,211-19; andPollard1974,49.Although ourfocus
is on commercial regionalism,itshouldbe notedthattheinterwarerawas also markedbytheexistenceof
at least fivecurrency regions.For an analysisof thepoliticaleconomyof currency regions,see, for
example,Cohen1997.
46. See, forexample,Condliffe1940,especiallychaps.8-9; Hirschman[1945] 1980; Kindleberger
1973;andOye 1992.
47. Irwin1993,91.He notesthatthesegeneralizationsaresomewhat inaccurate,
as do Eichengreen and
Frankel1995.Butbothstudiesconfirm thatregionalism effects
had different duringthenineteenth cen-
tury,theinterwar period,andthepresent;andbothviewregionalism intheinterwarperiodas mostmalign.
48. KenwoodandLougheed1971,218.
49. See Condliffe 1940;Eichengreen andFrankel1995,97; andHirschman [1945] 1980.

598 International
Organization
RegionalismSince WorldWarII
SinceWorldWarII, stateshavecontinued toorganizecommerce on a regionalbasis,
despitetheexistenceof a multilateral economicframework. To analyzeregional-
ism's contemporary growth,some studieshave assessed whether tradeflowsare
becomingincreasingly concentratedwithingeographically specifiedareas. Others
haveaddressedtheextentto whichPTAs shapetradeflowsandwhether theirinflu-
enceis rising.Stillothershaveexaminedwhether theratesat whichPTAsformand
statesjoin themhaveincreasedovertime.In combination, thesestudiesindicatethat
commercial regionalism has grownconsiderably overthepastfifty years.
As shownin Table 1-which presentsdata used in threeinfluential studiesof
regionalism-the regionalconcentration oftradeflowsgenerally hasincreasedsince
theendofWorldWar11.50Muchofthisoveralltendency is attributable
torisingtrade
within Western Europe-especiallyamongpartiesto theEC-and within EastAsia.
Some evidenceof an upwarddrift in intraregionalcommercealso existswithinthe
AndeanPact,theEconomicCommunity of WestAfricanStates(ECOWAS), and
betweenAustraliaandNew Zealand,although outsideoftheformer twogroupings,
intraregionaltradeflowshavenotgrownmuchamongdeveloping countries.
Onecentral reasonwhytradeis so highlyconcentrated within manyregionsis that
stateslocatedincloseproximity oftenparticipateinthesamePTA.51Thattheeffects
of variousPTAs on commercehaverisenovertimeconstitutes furtherevidenceof
regionalism's growth.52As thedata in Table 1 indicate,theinfluence of PTAs on
tradeflowshasbeenfarfromuniform. Some PTAs,liketheEC, seemtohavehada
profound effect,whereasothershave had littleimpact.53 But thedataalso indicate
that,in general,tradeflowshavetendedto increaseovertimeamongstatesthatare
members ofa PTAandnotmerelylocatedinthesamegeographic region,suggesting
thatpolicychoicesare at leastpartlyresponsible fortheriseof regionalism since
WorldWarII.
East Asia, however,is an interesting exception.Virtually no commercialagree-
mentsexistedamongEast Asian countries priorto themid-1990s,butrapid,eco-
nomicgrowththroughout theregioncontributed to a dramaticincreasein intra-
regionaltradeflows.54In lightofAsia's recentfinancialcrisis,itwillbe interesting
to
see whether theprocessof regionalization continues.Severeeconomicrecession
50. Thesedefineregionalismin somewhat different

ways.Anderson andNorheimexaminebroadgeo-
graphicareas,de Melo andPanagariya analyzePTAs,andFrankel, Stein,andWeiconsidera combination
of geographiczones and PTAs. See Andersonand Norheim1993; de Melo and Panagariya1993; and
Frankel,Stein,andWei 1995.
51. On theeffectsofPTAsontradeflows,see,forexample,Aitken1973;Frankel1993;Frankel, Stein,
andWei 1995;Linnemann1966;Mansfieldand Bronson1997;Tinbergen 1962; andWintersandWang
1l994.
52. See, forexample,Aitken1973;Frankel1993;andFrankel, Stein,andWei 1995.
53. Note,however,thatsome PTAs-especially Mercosur-havehad a largeeffecton tradesince
1990.Theireffectsarenotcaptured inTable 1.We aregratefultoStephanHaggardforbringing thispoint
toourattention.
54. See Andersonand Blackhurst 1993,8; Frankel1993; Frankel,Stein,and Wei 1995; and Saxon-
house1993.

TABLE 1. Intraregionaltradeflows duringthepost-WorldWarII era
A. Intraregional
tradedividedbytotaltradeofeach region
Region 1965 1970 1975 1980 1985 1990
EastAsia 0.199 0.198 0.213 0.229 0.256 0.293

WesternHemisphere 0.315 0.311 0.309 0.272 0.310 0.285
EuropeanCommunity 0.358 0.397 0.402 0.416 0.423 0.471
EuropeanFreeTradeArea 0.080 0.099 0.104 0.080 0.080 0.076
Mercosur 0.061 0.050 0.040 0.056 0.043 0.061
AndeanPact 0.008 0.012 0.020 0.023 0.034 0.026
NorthAmericanFreeTrade 0.237 0.258 0.246 0.214 0.274 0.246
Agreement
B. Intraregional
mnerchandise
exportsdividedbytotalmerchandise
exportsofeach region
Region 1948 1958 1968 1979 1990
WesternEurope 0.430 0.530 0.630 0.660 0.720

EasternEurope 0.470 0.610 0.640 0.540 0.460
NorthAmerica 0.290 0.320 0.370 0.300 0.310
SouthAmerica 0.200 0.170 0.190 0.200 0.140
Asia 0.390 0.410 0.370 0.410 0.480
Africa 0.080 0.080 0.090 0.060 0.060
MiddleEast 0.210 0.120 0.080 0.070 0.060
World 0.330 0.400 0.470 0.460 0.520
C. Intraregional
exportsdividedbytotalexportsofeach region
Region 1960 1970 1975 1980 1985 1990
EuropeanCommunity 0.345 0.510 0.500 0.540 0.545 0.604

EuropeanFreeTradeArea 0.211 0.280 0.352 0.326 0.312 0.282
AssociationofSoutheast
AsianNations 0.044 0.207 0.159 0.169 0.184 0.186
AndeanPact 0.007 0.020 0.037 0.038 0.034 0.046
Canada-UnitedStatesFreeTradeArea 0.265 0.328 0.306 0.265 0.380 0.340
CentralAmerican CommonMarket 0.070 0.257 0.233 0.241 0.147 0.148
LatinAmerican FreeTradeAssociation/ 0.079 0.099 0.136 0.137 0.083 0.106
LatinAmericanIntegration
Association
EconomicCommunity ofWestAfrican N/A 0.030 0.042 0.035 0.053 0.060
States
Preferential
TradingAreaforEasternand N/A 0.084 0.094 0.089 0.070 0.085
SouthernAfrica
Australia-NewZealandCloserEconomic 0.057 0.061 0.062 0.064 0.070 0.076
RelationsTradeAgreement
Source:Data inpartA aretakenfromFrankel,Stein,andWei 1995;partB, fromAndersonand

Norheim1993;andpartC, fromde Melo andPanagariya1993.
Note:N/Aindicatesdataunavailable.

600 International
Organization
withinAsia concurrent withrobustgrowthin NorthAmericaand WesternEurope

mayredirect tradeflowsacrossregions.Thiscase illustrates
theneedwe described
earliertodistinguish betweenpolicy-induced
regionalismandthatstemming primar-
ily fromeconomicforces.How important theAssociationof SoutheastAsian Na-
tions(ASEAN) andotherpolicyinitiatives areindirectingcommerce shouldbecome
cleareras theeconomiccrisisinAsia unfolds.
Also indicativeof regionalism's growthare theincreasingratesat whichPTAs
formed and statesjoinedthemthroughout thepost-World WarII period.55Figure1
reports thenumberofregionaltrading arrangements notified
to theGeneralAgree-
mentonTariffs andTrade(GATT)from1948to 1994.Clearly,thefrequency ofPTA
formation has fluctuated.
Few wereestablishedduringthe1940sand 1950s,a surge
inpreferential agreementsoccurredinthe1960sand1970s,andtheincidenceofPTA
creationagaintrailedoffin the1980s.56Buttherehasbeena significant risein such
agreements duringthe1990s; and morethan50 percentof all worldcommerceis
currently conductedwithinPTAs.57Indeed,theyhavebecomeso pervasivethatall
buta fewpartiesto theWorldTradeOrganization (WTO) now belongto at least
one.58
Regionalism, then,seemsto have occurredin twowavesduringthepost-World
WarII era. The firsttookplace fromthelate 1950s through the 1970s and was
markedby theestablishment of theEEC, EFTA, theCMEA, and a plethoraof re-
gionaltradeblocs formedby developingcountries. These arrangements wereiniti-
ated againstthebackdropof theCold War,therashof decolonization following
WorldWarII, and a multilateral commercial framework, all of whichcoloredtheir
economicand politicaleffects. VariousLDCs formedpreferential arrangements to
reducetheireconomicand politicaldependenceon advancedindustrial countries.
Designedtodiscourage imports andencourage thedevelopment ofindigenous indus-
tries,sucharrangements fostered atleastsometradediversion.59 Moreover, manyof
themwerebesetbyconsiderable conflictoverhowtodistribute thecostsandbenefits
stemming fromregionalintegration, how to compensatedistributional losers,and
how to allocateindustriesamongmembers.60 theCMEA represented
Similarly, an
attempt by theSovietUnionto promoteeconomicintegration amongitspolitical
allies,fosterthedevelopment oflocal industries,
andlimiteconomicdependence on
theWest.Ultimately, itdidlittletoenhancethewelfareofparticipants.61 In contrast,
theregionalarrangements concludedamongdevelopedcountries-especially those
inWestern Europe-are widelyviewedas trade-creatinginstitutionsthatalso contrib-
utedtopoliticalcooperation.62
55. Mansfield1998.
56. See also de Melo andPanagariya1993,3.
57. Serraetal. 1997,8, fig.2.
58. WorldTradeOrganization 1996,38, and 1995.
59. Forexample,Pomfret 1988,138.
60. See Bhagwati1993;andForoutan1993.
61. Indeed,somescholarshavegoneso faras to characterize theCMEA as tradedestroying.
See, for
example,Pomfret 1988,94-95, 143.
62. For analysesof tradecreationand tradediversionin Europe,see Eichengreen
andFrankel1995;
FrankelandWei 1998;andPomfret 1988,128-35.

35
30
?25 --
H
10 1 111 I
0-
1948-54 1955-59 1960-64 1965-69 1970-74 1975-79 1980-84 1985-89 1990-94

Source:WorldTradeOrganization
1995.
Note:Eachpreferential
trading is listedintheyearitwas signed.
arrangement
FIGURE 1. The numberofpreferentialtradingarrangementsnotifiedto the GAT7,
1948-94.
The mostrecentwaveofregionalism has arisenin a different

contextthanearlier
episodes.It emergedin thewake of theCold War's conclusionand theattendant
changesin interstate
powerandsecurity relations. Furthermore,theleadingactorin
theinternational
system(theUnitedStates)is activelypromotingandparticipatingin
theprocess.PTAsalso havebeenusedwithincreasing tohelpprompt
regularity and
consolidateeconomicandpoliticalreforms in prospectivemembers, a rarityduring
prioreras.Andunliketheinterwar period,themostrecentwave ofregionalism has
beenaccompanied byhighlevelsofeconomicinterdependence, a willingnessbythe
majoreconomicactorstomediatetradedisputes, anda multilateral(thatis,theGATT/
WTO) framework thatassiststhemin doingso and thathelps to organizetrade
As RobertZ. Lawrencenotes,
relations.63
The forcesdrivingthecurrent developments differradicallyfromthosedriving
previouswavesofregionalism in thiscentury.Unliketheepisodeofthe1930s,
thecurrentinitiativesrepresenteffortstofacilitate
theirmembers' in
participation
theworldeconomyrather thantheirwithdrawal fromit.Unlikethosein the
1950sand 1960s,theinitiatives involving developing countriesarepartofa
to liberalizeandopentheireconomiestoimplement
strategy andforeign-
export-
investment-ledpoliciesratherthantopromote importsubstitution.64
63. PerroniandWhalley1996.
64. Lawrence1996,6. On thedifferences in the1930sandin thecontemporary
betweenregionalism
andFrankel1995;Oye 1992;andPomfret
era,see also Eichengreen 1988.

602 International
Organization
Ourbriefhistorical
overviewindicatesthatregionalism hasbeenan enduring fea-
tureoftheinternational
politicaleconomy, butbothitspervasiveness andcasthave
changedovertime.We arguethatdomesticand international politicsare centralto
explainingsuchvariationsas well as theoriginsand natureof thecurrent wave of
regionalism.
In whatfollows,we present a seriesofpoliticalframeworks foraddress-
ingtheseissuesandraisesomeavenuesforfurther research.
DomesticPoliticsand Regionalism
Although itis frequently

acknowledged thatpoliticalfactorsshaperegionalism,sur-
prisingly
few systematic attemptshave been made to addresswhichfactorsmost
fullydetermine whystateschoosetopursueregionaltradestrategies andtheprecise
natureoftheireffects.
Earlyeffortsto analyzethepoliticalunderpinningsofregion-
alismwereheavilyinfluenced by "neofunctionalism."65 JosephS. Nye pointsout
that"whatthesestudieshadincommonwas a focuson thewaysin whichincreased
transactionsandcontacts
changedattitudes andtransnationalcoalitionopportunities,
and thewaysin whichinstitutionshelpedto fostersuchinteraction."66 Lately,ele-
mentsof neofunctionalism have been revived,especiallyin researchon European
integration.
Manysuchanalysesconcludethatincreased economicflowsamongmem-
bersof theEU have changedthepreferences of domesticactors,leadingthemto
pressforpoliciesandinstitutions
thatpromote deeperintegration.67
Societal Factors
As neofunctionalstudiesindicate,
thepreferences andpoliticalinfluence ofdomestic
groupscan affectwhyregionalstrategiesareselectedandtheirlikelyeconomiccon-
sequences.Regionaltradeagreements discriminate againstthirdparties,yielding
rentsforcertaindomesticactorswhomayconstitute a potentsourceofsupport fora
PTA's formation and maintenance.68Industries thatcouldwardoffcompetitors lo-
catedin thirdpartiesor expandtheirshareof international marketsif theywere
coveredbya PTAhaveobviousreasonstopressforitsestablishment.69 So do export-
orientedindustries
thatstandto benefitfromthepreferential access to foreignmar-
ketsaffordedbya PTA.In addition, thoughitis all butimpossibletoconstruct a PTA
thatwouldnotadverselyaffectat least some politicallypotentsectors,it is often
65. See, forexample,Deutschetal. 1957;Haas 1958;andNye 1971.

66. Nye 1988,239.
67. For example,SandholtzandZysmanarguethatthe1992 projectin Europeto "completethein-
ternalmarket" resulted
froma confluenceofleadershipbytheEuropeanCommission andpressurefroma
transnational
coalitionofbusinessinfavorofa Europeanmarket. Friedenadvancesa similarargument in
explainingsupportfortheEuropeanMonetary Union,stressingthesalienceofthepreferences
ofEuropean-
orientedbusinessand financialactors.Moravcsikalso viewstheoriginsof Europeanintegrationas re-
sidingin thepressuresexertedby Europeanfirmsand industries withan externalorientationforthe
creation
ofa largermarket.See SandholtzandZysman1989;Frieden1991;andMoravcsik1998.
68. See Gunter1989,9; andHirschman 1981.
69. Forexample,Haggard1997.

possibleto excludethemfromthearrangement, a tack,forexample,thatled to "the

EuropeanEconomicCommunity's exclusionof agriculture (and,in practice,steel
and manyothergoods), theCaribbeanBasin Initiative'sexclusionof sugar,and
ASEAN's exclusionofjustabouteverything ofinterest."70
Regionaltradestrategies, therefore,hold some appeal forpublicofficialswho
needtoattract thesupportofbothimport-competing andexport-oriented sectors.The
domesticpoliticalviabilityofa prospective PTA,theextenttowhichitwillcreateor
diverttrade,andtherangeofproducts itwillcoverhingepartly on thepreferences of
andtheinfluence wieldedbykeysectorsin eachcountry as wellas theparticularset
ofcountries thatcanbe assembledtoparticipate init.Unfortunately, existingstudies
offerrelatively fewtheoretical orempirical insights intotheseissues,although some
recentprogress hasbeenmadeon thisfront.
Publicofficialsmuststrikea balancebetweenpromoting a country'saggregate
economicwelfareand accommodating interest groupswhosesupportis neededto
retainoffice. GeneM. Grossman andElhananHelpmanarguethatwhether a country
choosesto entera regionaltradeagreement is determined by how muchinfluence
different interestgroupsexertand how muchthegovernment is concernedabout
voters'welfare.71Theydemonstrate thatthepoliticalviabilityof a PTA oftende-
pendson theamountof discrimination it yields.Agreements thatdiverttradewill
benefit certaininterestgroupswhilecreating costsbornebythepopulaceatlarge.If
thesegroupshavemorepoliticalcloutthanothersegments thena PTAthat
ofsociety,
is tradediverting standsa betterchanceof beingestablished thanone thatis trade
creating.72 GrossmanandHelpmanalso findthatby excludingsomesectorsfroma
PTA,governments can increasethedomesticsupport forit,thushelpingto explain
whymanyPTAsdo notcoverpolitically sensitive industries.Consistent withearlier
research, theirresultsimplythattrade-diverting PTAs will facefewerpoliticalob-
staclesthantrade-creating ones.73If so, usingpreferential arrangements as building
blocksto support liberalization
multilateral willrequiresurmounting substantialdo-
mesticimpediments.
Opinionis dividedovertheease withwhichthiscanbe accomplished. Kenneth A.
Oye arguesthatdiscriminatory PTAscan actuallylaythebasisforpromoting multi-
lateralopenness,especiallyiftheinternational trading systemis relativelyclosed.74
In his view,discrimination stemming froma preferential arrangement can mobilize
and strengthen thepoliticalhandofexport-oriented in-
(and otherantiprotectionist)
terestslocatedin thirdparties,thereby generating domesticpressurein thesestates
foragreements thatexpandtheiraccesstoPTAmembers' markets.Suchagreements,
inturn, arelikelytocontribute tointernational openness.However, Anne0. Krueger
maintainsthattheformation and expansionof PTAs maydampenthesupportof
exporters forbroaderliberalization.
As sheputsit,"For thoseexporters whowould
70. EichengreenandFrankel1995,101.
71. GrossmanandHelpman1995,668; and 1994.
72. GrossmanandHelpman1995,681. See also Pomfret
1988,190.
73. Forexample,Hirschman 1981,271.
74. Oye 1992,6-7, 143-44.

604 International
Organization
supportfreetrade,thevalueoffurther multilateraltradeliberalization is diminished

witheverynewentrant intoa preferential tradearrangement, so thatexporters' sup-
portformultilateral liberalizationis likelyto diminishas vestedinterests profiting
fromtradediversion increase."75 Hence,itis notclearwhether exporters willsupport
regionalism insteadoforinadditiontomultilateral liberalization.
Equallyunclearis whyexporters wouldpreferto liberalizetradeon a regional
ratherthana multilateral basisinthefirst place.One possibility is thatexporters will
be morelikelyto support regionalstrategies iftheyoperatein industries character-
izedbyeconomiesofscale,since,byprotecting thesesectorsfromforeign competi-
tionand broadening theirmarketaccess,theformation of a PTA can bolstertheir
competitiveness. Indeed,Milnerarguesthatfirmsin such industries maybe key
proponents of regional,ratherthanunilateralor multilateral, tradepolicies.76But
because PTAs also liberalizetradeamongparticipants, firmswithcompetitors in
prospectivemember countries mayseektobarthesestatesfromentering an arrange-
mentoropposeitsestablishment altogether.
Thoughresearchstressing theeffects ofsocietalfactorsonregionalism offersvari-
ous usefulinsights,italso suffersfromatleasttwodrawbacks. First,thereis a lackof
empiricalevidenceindicating whichdomesticgroupssupport regionaltradeagree-
ments,whoseinterests theseagreements serve,and whyparticular groupsprefer
regionalto multilateral liberalization. For example,Oye maintains thatdiscrimina-
toryarrangements piquedtheinterest ofexporters, andMilnerclaimsthatexporters-
particularlythosewithlargescale economies-mayhavefavoredand gainedfrom
NAFTA.77 Neither, however, demonstrates thatexporterspreferred regionalarrange-
mentsto multilateral ones.Regionalliberalization mayhavebeenwhattheyhad to
settleforgiventheexistenceof strong,opposingdomesticinterests. Second,we
knowlittleaboutwhether, onceinplace,regionalarrangements foster domesticsup-
portforbroader,multilateral tradeliberalization or whether theyundermine such
support.Theseissuesoffer promising avenuesforfuture research.
DomesticInstitutions
In thefinalanalysis,thedecisiontoentera PTAis madebypolicymakers. Boththeir
preferences andthenatureofdomesticinstitutionsconditiontheinfluence ofsocietal
actorson tradepolicyas wellas independently whether
affecting stateselectto em-
barkon regionaltradeinitiatives. Of course,policymakers and politicallypotent
societalgroupssometimes sharean interestin forminga PTA. Manyregionaltrade
arrangements thatLDCs establishedduringthe1960sand 1970s,forinstance, grew
outofimport-substitutionpoliciesthatwereactivelypromoted bypolicymakers and
stronglysupported byvarioussegments ofsociety.78
75. Krueger1997,19 fn.27.

76. Milner1997.See also BuschandMilner1994.
77. See Milner1997;andOye 1992.
78. See, forexample,Krueger1993,77, 87; andNoguesandQuintanilla1993,280-88.

New WaveofRegionalism 605
However,PTAs also havebeencreatedbypolicymakers whopreferred toliberal-

ize tradebutfaceddomesticobstaclesto doingso unilaterally. In thisvein,Barry
Eichengreen andJeffrey A. Frankelpointoutthat"ColumbiaandVenezueladecided
in November1991 to turnthepreviously moribund AndeanPact intowhatis now
one of theworld'smostsuccessfulFTAs. Policymakers in thesecountries explain
theirdecisionas a politically
easywaytodismantle protectionist
barrierstoan extent
thattheirdomesticlegislatures wouldneverhave allowedhad thepolicynotbeen
pursuedina regionalcontext."79 Evenifinfluentialdomesticactorsopposecommer-
cial liberalization institutional
altogether, factorssometimes createopportunitiesfor
policymakers to sidestepsuchoppositionby relyingon regionalor bilateraltrade
strategies.Considerthesituation NapoleonIII facedon theeve oftheAnglo-French
commercial arrangement. Anxiousto liberalizetradewithGreatBritain, he encoun-
tereda Frenchlegislature andvarioussalientdomesticgroupsthatwerehighlypro-
tectionist.Butalthough thelegislature
hadconsiderable controloverunilateral trade
policy,theconstitution of 1851 permittedtheemperor to signinternationaltreaties
without thisbody'sapproval.Napoleon,therefore, was able to skirtwell-organized
protectionistinterests muchmoreeasilybyconcluding a bilateralcommercial agree-
mentthatwould have been impossiblehad he reliedsolelyon unilateralinstru-
ments.80
Similarly,governments thatproposea programof liberaleconomicreforms and
encounter (or expectto encounter) domesticoppositionmayentera PTA to bind
themselves to thesechanges.8" Mexico's decisionto enterNAFTA,forexample,is
frequentlydiscussedin suchterms. As onerecentstudyconcludes,"NAFTAshould
be understood as a commitment device .. ., [which]combinedwiththeinfluence of
new elitesthatbenefit fromexportpromotion, greatlyincreasesthelikelihoodthat
tradeliberalizationinMexicowillnotbe derailed."82 Fora statethatis interestedin
makingliberaleconomicreforms, theattractivenessof lockingthemin through an
externalmechanism, suchas joininga PTA,is likelyto growifinfluential segments
of societyoppose reforms and if domesticinstitutions renderpolicymakers espe-
ciallysusceptibleto societalpressures.Undertheseconditions, however,govern-
mentsmusthavetheinstitutional meansto circumvent domesticopposition in order
to entersuchagreements, and thecostsof violatinga PTA mustbe highenoughto
ensurethatreforms willnotbe abrogated.
Although governments maychoosetojoinregionalagreements topromote domes-
ticreforms, theymayalso do so if theyresistreforms butare anxiousto reapthe
benefitsstemming from accesstoothermembers'
preferential markets.Existing mem-
bersof a preferential groupingmaybe able to influencethedomesticeconomic
79. Eichengreen andFrankel1995,101.

80. See Irwin1993,96; and Kindleberger1975,39-40. Moreover,thisis notan isolatedcase. Irwin
notesthat"Commercial agreements intheformofforeigntreaties
provedusefulincircumventing protec-
tionist
interests
inthelegislature Europe."Irwin1993,116fn.7.
throughout
81. See de Melo,Panagariya,andRodrik1993;Haggard1997;Summers1991;andWhalley1998.
82. Tomelland Esquivel 1997,54. See also Whalley1998,71-72. Thatthisarrangement helpedto
consolidateMexicaneconomicreforms its desirability
probablyheightened fromthestandpoint of the
UnitedStatesandCanadaas well.See, forexample,EichengreenandFrankel1995,101.

606 International
Organization
policiesandthepoliticalinstitutions ofprospective members bydemanding thatthey

institute domesticreforms priorto accession.Alongtheselines,thereare various
cases wherePTAshavemadetheestablishment ofdemocracy a necessary condition
formembership. Both Spain and Portugalwererequiredto completedemocratic
transitions beforebeingadmitted to theEC; indeed,L. Alan Wintersarguesthat
solidifying democracy in thesestatesas wellas in Greecewas a chiefreasonforthe
EC's southern expansion.83 Similarly,Argentina andBrazilinsistedthata democratic
systemofgovernment wouldhavetobe established inParaguaybeforeitcouldenter
Mercosur.84 Morerecently, theEU hasindicated thatvariousEasternEuropeancoun-
triesmustconsolidatedemocratic reforms as one preconditionformembership. As
Raquel Fernandezmentions, "Both theEU and theCEE [CentralEast European]
countries wantedto lockin a politicalcommitment to democracy in theCEE coun-
tries;sincethepromiseof eventualEU membership impliedin theAgreements ...
was conditional on thecontinued democratization oftheCEE countries, thecostof
exitto thesecountries as a consequenceofreversion to authoritarianism
wouldnot
justbe theloss ofbenefits, ifany,oftheAgreements, buttheloss oftheprospectof
EU membership."85 Another studyechoesthisview,notingthata keymotivebehind
anyfuture eastward expansionoftheEU wouldbe fostering democracy intheformer
members oftheWarsawPact.86Clearly,we arenotsuggesting thatthedesiretogain
accessto a PTAhasbeena primary forcedriving democratization inEasternEurope
or elsewhere.However,recentexperience suggeststhatitcan sometimes be fruitful
toincludesuchaccessin a packageofinducements designedto spurpoliticalreform
innondemocratic states.
UsingPTA membership to stimulateliberaleconomicand politicalreforms is a
distinctive featureof thelatestwave of regionalism. Thatthesereforms havebeen
designedto openmarkets andpromote democracy mayhelpto accountfortherela-
tivelybenigncharacter of thecurrent wave. Underlying demandsfordemocratic
reform are fearsthatadmitting nondemocratic countries mightundermine existing
PTAs composedof democraciesand thebeliefthatregionscomposedof stablede-
mocraciesareunlikely toexperience Bothviewsremainopentoquestion.
hostilities.
But if entering a preferential arrangement actuallypromotestheconsolidation of
liberaleconomicandpoliticalreforms andmutestheeconomicandpoliticalinstabil-
itythatoftenaccompaniessuchreforms, thenthecontemporary riseofregionalism
maycontribute tobothcommercial opennessandpoliticalcooperation.87
Atthesametime,thepoliticalviability ofsuchPTAs,thecredibility oftheinstitu-
tionalchangestheyprompt, and theeffectof thesearrangements on international
opennessandcooperation dependheavilyon thepreferences of powerful domestic
groups.Whereasdomesticanalysesofregionalism havegenerally focusedon either
83. Winters1993,213.
84. Birch1996,186.
85. Femrnndez 1997,26.
87. On theseissues,see HaggardandKaufman1995;HaggardandWebb1994;Lawrence1996;Mans-
fieldandSnyder1995;andRemmer1998.

societalorinstitutional factors,moreattention needstobe centered on howtheinter-

actionbetweenthesefactors influences whether andwhencountries entera regional
arrangement as well as on thepoliticaland economicconsequencesof doingso.88
Greaterattention also needsto be focusedon whystateleadershave displayeda
particularpreference forentering regionaltradearrangements. One possibility is that
theydo so to liberalizetradewhenfacedwithdomesticobstaclesto reducingtrade
barriers on a unilateral ormultilateral basis.Theoriesoutlining theconditions under
whichleadersprefer toliberalizecommerce inthefirstplace,however, remainscarce.
Furthermore, theextent towhichPTAshavebeenusedas instruments forstimulat-
ingeconomicand politicalliberalization duringthecurrent wave of regionalism is
quiteunusualbyhistorical standards. Chile,forexample,withdrew fromtheAndean
Pact in 1976 becauseit wantedto completea seriesof economicreforms thatthis
arrangement prohibited.89 Moreover, attempts tospurdemocratization inprospective
PTA membersare largelyuniqueto thecontemporary wave.As notedearlier,the
recenttendencyof existingPTAs to demandthatnondemocratic statescomplete
politicalreforms priortoaccessionprobably reflects
thegrowing number ofpreferen-
tialarrangements composedofdemocracies andthewidelyheldbeliefbypolicymak-
ers in theseregionalgroupings thatfostering democracywill promotepeace and
prosperity.Nonetheless, we lacka sufficient theoretical
understanding ofthecondi-
tionsunderwhichPTA membership is used to promptliberalizing reforms and the
factors affecting thesuccessofsuchefforts.
A relatedlineofresearchsuggeststhatthesimilarity ofstates'politicalinstitutions
influences whether theywill forma preferential arrangement and itsefficacy once
established. Manyscholarsviewa regionas implying substantial institutional
homo-
geneityamongtheconstituent states.Likewise,some observersmaintainthatthe
feasibilityofcreating a regionalagreement dependson prospective members having
relativelysimilareconomicorpoliticalinstitutions.90 If tradeliberalizationrequires
harmonization in a broadsense,suchas in theSingleEuropeanAct,thenthemore
homogeneous are members'nationalinstitutions, theeasierit maybe forthemto
agreeoncommonregionalpoliciesandinstitutions. Otherspointoutthatcountries in
close geographic proximity have muchless impetusto establishregionalarrange-
mentsiftheirpoliticalinstitutions differ In Asia,forexample,thescar-
significantly.
cityofregionaltradearrangements is partlyattributableto thewidevariation in the
constituent states'politicalregimes,whichrangefromdemocracieslike Japanto
autocracies likeVietnamandChina.91
As theinitialdifferences in states'institutionsbecomemorepronounced, so do
boththepotential gainsfromand theimpediments to concludinga regionalagree-
ment.Consequently, thedegreeofinstitutional similarityamongstatesandthepros-
pectthatmembership in a regionalarrangement willprecipitate institutional
change
88. Forone studyofthissort,see de Melo,Panagariya,

andRodrik1993.
89. Nogu6sandQuintanilla 1993,285.
90. Forexample,ibid.
91. Katzenstein
1997a.

608 International
Organization
inthesestatesmaybearheavilyon whether theyforma PTA.92The extantliterature,

however,provideslittleguidanceabouthow largeinstitutional
differencescan be
beforeregionalintegration
becomespolitically
infeasible.
Nordoesitindicatewhether
regionalagreementscanhelpmembers tolockininstitutional
reforms ifthereis little
preexisting
domesticsupport forthesechanges.
International
Politicsand Regionalism
The decisionto forma PTA restspartlyon thepreferences and politicalpowerof

varioussegments ofsociety,
theinterestsofstateleaders,andthenatureofdomestic
institutions.
In theprecedingsection,we suggestedsome ways thatthesefactors
mightoperateseparately and in combinationto influencewhether statespursuere-
gionaltradestrategies
andregionalism's economicconsequences.But statesdo not
makethedecisionto entera PTA in an international politicalvacuum.On thecon-
interstate
trary, powerandsecurity relations
as well as multilateral have
institutions
playedkeyrolesin shapingregionalism. Equallyimportant is how regionalismaf-
fectspatterns
ofconflictandcooperation amongstates.We nowturntotheseissues.
PoliticalPower,Interstate andRegionalism
Conflict,
Studiesaddressing thelinksbetweenstructural powerandregionalism haveplaced
primary stresson theeffects ofhegemony. Variousscholarsarguethatinternational
economicstability is a collectivegood,suboptimal amountsof whichwillbe pro-
videdwithout a stablehegemon.93 Discriminatory tradearrangements, in turn,may
be outgrowths of theeconomicinstability fostered by thelack or declineof sucha
country.94
Offering one explanation forthetrade-diverting character ofPTAs during
theinterwarperiod,thisargument is also invokedbymanyeconomists whomaintain
thatthecurrent wave of regionalism was triggered or acceleratedby theU.S. deci-
sionto pursueregionalarrangements in theearly1980s,once itseconomicpower
wanedandmultilateral tradenegotiations In fact,thereis evidencethatover
stalled.95
thepastfiftyyearstheerosionofU.S. hegemony has stimulated a riseinthenumber
ofPTAs andstatesentering them.96Butwhywaninghegemony has beenassociated
withthegrowthof regionalism sinceWorldWarII, whateffects PTAs formedin
responseto declininghegemony will have on themultilateral tradingsystem,and
whether variationsin hegemony contributed to earlierepisodesof regionalism are
issuesthatremainunresolved.97
92. Forexample,Hurrell1995,68-71.
93. See Gilpin1975;Kindleberger1973;andLake 1988.
94. See, forexample,Gilpin1975and 1987;Kindleberger
1973;andKrasner1976.
95. See, forexample,Baldwin1993;Bhagwati1993;BhagwatiandPanagariya1996;Krugman1993;
andPomfret 1988.
96. Mansfield1998.
97. See, forexample,McKeown1991;Oye 1992;andYarbrough andYarbrough
1992.

Some observers arguethatas a hegemon'spowerrecedes,ithas reasontobehave

in an increasingly
predatory manner.98 To buffer theeffects of suchbehavior,other
statesmightforma seriesofpreferential tradingblocs,thereby offa wave of
setting
regionalism.RobertGilpinsuggeststhatthissortofprocessbeganto unfoldduring
the1980s,givingrisetoa systemoflooseregionaleconomicblocsthatis coalescing
aroundWestern Europe,theUnitedStates,andJapan.He also pointsoutthatbecause
of theinherentproblemsof "pluralist"leadership, thesedevelopments threatenthe
unityoftheglobaltrading order,a prospectthatrecallsKrugman'sclaimsaboutthe
adverseeffectson globalwelfarestemming fromsystemscomposedof threetrade
blocs.99Theextent towhichU.S. hegemony hasactuallydeclinedandwhether sucha
systemis actuallyemerging, however, remainthesubjectsoffiercedisagreement.
Furthermore, evenifsucha systemis emerging, thereareatleasttworeasonswhy
thesituationmaybe less direthantheprecedingaccountwouldindicate.First,de-
spitethepotential problemsof pluralistleadership, it is widelyarguedthatglobal
opennesscanbe maintained inthefaceofdeclining (ortheabsenceof)hegemony ifa
smallgroupof leadingcountries collaborates to supportthetradingsystem.100 The
erosionofU.S. hegemony mayhavestimulated thecreationandexpansionofPTAs
bya setofleadingeconomicpowersthatfeltthesearrangements wouldassistthem
in managingtheinternational economy.101 Drawingsmallerstatesintopreferential
groupings witha relativelyliberalcasttowardthird partiesmightreducethecapacity
of thesestatesto establisha seriesof moreprotectionist blocs and bindthemto
decisionsaboutthe systemmade by theleadingpowers.Especiallyif thereis a
multilateral
framework (liketheGATT/WTO)towhicheachleadingpower(includ-
ing thedeclininghegemon)is committed and thatcan help to facilitateeconomic
cooperation,thegrowthof regionalism duringperiodsof hegemonicdeclinecould
contributetothemaintenance ofan opentrading system.
Second,Krugmanarguesthatthedangersposedby a systemof threetradeblocs
are mutedif each bloc is composedof countries in close proximity thatconducta
highvolumeofcommerce priortoitsestablishment. Bothhe andSummers conclude
thatthese"natural"trading blocs reducetheriskof tradediversionand thatthey
makeup a largeportion oftheexisting PTAs.102Regardlessofthisargument's merits,
98. Forexample,Gilpin1987,88-90,andchap.10.
99. See ibid.;andKrugman1991aand 1993.On theproblemsassociatedwithpluralist leadership, see
also Kindleberger 1973.
100. See, forexample,Keohane1984;andSnidal1985.
101. On thisissue,see Yarbrough andYarbrough1992.
102. Krugman1991aand 1993; andSummers1991.Of course,thesefactorsmaybe related,sincean
inverserelationship costsandtradeflows.However,somestrands
tendstoexistbetweentransportation of
thisargument focuson highlevelsoftrade,whichmaybe a productofgeographical proximity, whereas
othersfocuson transportation costs,whichareexpectedtobe lowerforstatesin thesameregionthanfor
otherstates.See BhagwatiandPanagariya1996,7 fn.7. Wonnacott andLutz,whofirst coinedtheterm
"naturaltradingpartners," arguethatthe economicdevelopment of states,the extentto whichtheir
economiesarecomplementary, andthedegreeto whichtheycompetein international markets also influ-
encewhether trading arenatural.
partners Thesefactors,
however, havereceivedrelatively littleattention
andwe therefore do notexaminethemhere.See Wonnacott andLutz 1989.

610 International
Organization
whichhavebeenhotlydebatedby economists,103 it begs an important setof ques-

tions:Whydo some "natural"tradepartners formPTAs whileothersdo not?And
whydo some "unnatural" partnersdo so as well?Thereis amplereasonto expect
thattheanswerstothesequestionshingelargelyon domesticpoliticalfactors andthe
natureofpoliticalrelations betweenstates.
Centralto thelinksbetweeninternational politicalrelationsandtheformation of
PTAs are theeffectsof tradeon states'political-military power.104JoanneGowa
pointsoutthattheefficiency gainsfromopentradepromotethegrowth of national
income,whichcanbe usedtoenhancestates'political-military capacity.105Countries
cannotignorethesecurity externalities
stemming fromcommerce without jeopardiz-
ingtheirpoliticalwell-being.She maintains thatcountriescan attendto theseexter-
nalitiesby tradingmorefreelywiththeirpolitical-military allies thanwithother
states.SincePTAsliberalizetradeamongmembers, Gowa's argument suggeststhat
sucharrangements areespeciallylikelyto formamongallies.In PTAs composedof
allies,thegainsfromliberalizingtradeamongmembers bolsterthealliance'soverall
political-military
capacity,andthecommonsecurity aimsofmembers attenuate the
politicalrisksthatstatesbenefitingless fromthearrangement mightotherwise face
fromthosebenefiting more.
Returning to theclaimsadvancedby Krugmanand Summers, certainblocs (for
example,thosein NorthAmericaandWestern Europe),therefore, mayappearnatu-
ral partlybecause theyare composedof allies,whichtendto be locatedin close
proximity and to tradeheavilywitheach other.106Furthermore, allies maybe quite
willingto formPTAs thatdiverttradefromadversaries lyingoutsidethearrange-
ment,iftheyanticipate thatdoingso willimposegreater economicdamageon their
foesthanon themselves. In thesamevein,adversaries havefewpoliticalreasonsto
forma PTA,and allies thatestablishone areunlikelyto permittheiradversaries to
join, thuslimiting thescope fortheexpansionof preferential arrangements. Either
situation couldundermine thesecurity
ofmembers, sincesomeparticipants arelikely
to derivegreatereconomicbenefits thanothersevenifall of themrealizeabsolute
gainsin welfare.It is no coincidence,forinstance,thatpreferential agreements be-
tweentheEC/EU and EFTA, on theone hand,and variousstatesformerly in the
Sovietorbit,on theother, wereconcludedonlyaftertheendoftheColdWarandthe
103. BhagwatiandPanagariya, forexample,havelodgedseveralcriticisms againstit.First,thereare

no clearempiricalstandards forgaugingwhether a givenpairof tradepartners is natural.Second,they
challengethe assumption thathightradevolumesamongnaturaltradepartners implythatlow trade
volumesexistamong"unnatural" partners,
thereby limitingthescopefortradediversion. Third,a high
initialleveloftradebetweenstatesneednotemanatefromeconomiccomplementarities; instead,itmight
stemfrompreexisting patterns If so, thesestatesmaynotbe naturaltradepartners,
ofdiscrimination. and
anyPTA theyestablishmaynotbe tradecreating. See Bhagwati1993,34-35; andBhagwatiand Pana-
gariya1996.
104. On therelationshipbetweentradeandpoliticalpower,see Baldwin1985;Gowa 1994;Hirschman
[1945] 1980;andKeohaneandNye 1977.
105. Gowa 1994.
106. On therelationship betweenalliancesand proximity, see Farberand Gowa 1997,411. On the
relationshipbetweenalliancesandtrade,see Gowa 1994;andMansfield andBronson1997.

collapseof theWarsawPact.107Also, althoughdeeppoliticaldivisionscontinueto

existin variouspartsof the world,thelack of competingmajorpoweralliances
mayhelpto accountfortherelatively benigneconomiccast of thelatestwave of
regionalism.
Another waythatregionalarrangements can affect
powerrelations is byinfluenc-
ingtheeconomicdependence ofmembers. Ifstatesthatderivethegreatest economic
gainsfroma PTA aremorevulnerable to disruptionsofcommercial relations within
thearrangement thanotherparticipants, thepoliticalleverageofthelatteris likelyto
grow.Thispointhasnotbeenloston stateleaders.
Prussia,forexample,establishedtheZollvereinlargelyto increaseits political
influence overtheweakerGermanstatesand to minimize Austrianinfluence in the
region.108As a result,
itrepeatedly opposedAustria'sentry intotheZollverein.Simi-
larly,bothGreatBritainandPrussiaobjectedtotheformation ofa proposedcustoms
unionbetweenFranceand Belgiumduringthe 1840son thegroundsthatit would
promoteFrenchpowerand undermine Belgianindependence. As Vinerpointsout,
"Palmerston tookthepositionthateveryunionbetweentwocountries incommercial
matters mustnecessarily tendtoa community ofactioninthepoliticalfieldalso,but
thatwhensuchcommunity is established betweena greatpoweranda smallone,the
will of thestronger mustprevail,and thereal and practicalindependence of the
smallercountry willbe lost."109Furthermore, Albert0. Hirschman andothershave
describedhow variousmajorpowersused regionalarrangements to bolstertheir
politicalinfluenceduringthe interwar periodand how certainarrangements that
seemedlikelyto bearheavilyon theEuropeanbalanceofpower(liketheproposed
Austro-German customsunion)wereactivelyopposed.110
Since WorldWarII, stronger stateshave continuedto use PTAs as a meansto
consolidatetheirpoliticalinfluence overweakercounterparts. The CMEA and the
manyarrangements thattheEC established withformer coloniesofitsmembers are
cases inpoint.The CaribbeanBasinInitiative launchedbytheUnitedStatesin 1982
hasbeendescribed in similarterms.111A relatedissueis raisedbyJosephM. Grieco,
whoarguesthat,overthepastfifty years,theextentofinstitutionalization inregional
arrangements has beeninfluenced by powerrelationsamongmembers.112 In areas
wherethelocal distribution ofcapabilities has shiftedorstateshaveexpectedsucha
shifttooccur,weakerstateshaveopposedestablishing a formalregionalinstitution,
fearing thatitwouldreflect theinterests ofmorepowerful members andundermine
theirsecurity.Another view,however, is thatregionalinstitutions
fosterstability
and
constrain theabilityof membersto exercisepower.A recentstudyof theEU, for
example,concludesthatalthoughGermany'spowerhas enabledit to shapeEuro-
107. Fora listofthesearrangements,

see WorldTradeOrganization1995,85-87.
108. Viner1950,98.
109. Ibid.,87.
110. See, forexample,Condliffe1940;Hirschman [1945] 1980;Viner1950,87-91; andEichengreen
andFrankel1995,97.
111. Forexample,Pomfret 1988,163.
112. Grieco1997.

612 International
Organization
pean institutions,Germany'sentanglement withintheseinstitutions has takenthe

hardedgeoffitsinterstate bargaining anderodeditshegemony inEurope.113
The linksbetweenpowerrelationsandPTAs remainimportant in thecontempo-
raryera,although theyhavenotbeenstudiedinsufficient depth.Butincontrast tothe
interwar period,thereis relatively littleindicationthatregionalism has been the
productof activeattempts by statesto promotetheirpolitical-military
powersince
WorldWarII. BarryBuzanattributes thischangetotheemergence ofbipolarity,the
declineofempires, andtheadventofnuclearweapons.114The latestwaveofregion-
alismhas beenmarkedby especiallyfewinstancesof statesusingPTAs to bolster
theirpolitical-militarycapacity.Thatis probablyone reasonwhyregionalism has
donelesstodivert tradeoverthepastfifty yearsthanduringtheinterwar It
period.11"
also mayhelptoexplainwhyPTAmembership hasinhibitedarmedconflict through-
outthepost-World WarII era.116Gilpinhas distinguishedbetweenbenignandma-
levolentstrainsof regionalism. On theone hand,regionalism can promoteinterna-
tionaleconomicstability, multilateral andpeace.On theotherhand,it
liberalization,
can have a mercantilist tenor,degrading economicwelfareand fostering interstate
conflict.
117Theavailableevidence suggests that,fromaninternational
politicalstand-
point,regionalism has beenrelatively benignsinceWorldWarII, whichmayhave
dampeneditspotentially pernicious economicconsequences.118
Powerand security relationshave influenced theformationand spreadof PTAs.
Thatsuchrelationsare also likelyto affectthewelfareimplications of preferential
arrangements poses a centralchallengeto themanyeconomicstudiesthatanalyze
regionalism in an internationalpoliticalvacuum.However,littlecontemporary re-
searchhas directly addressedthesetopics.Moreover, theexisting
literaturedoes not
furnishan adequateunderstanding ofhowpowerandsecurity relationshaveshaped
regionalism overtime;nordoes it resolvequestionsabouthow recentchangesin
bothregionalandglobalpoliticshaveaffected theriseandcastofthelatestwaveof
PTAs.
Multilateral
Institutions,
Strategic andRegionalism
Interaction,
One ofthemostdistinctivefeatures
ofthetwowavesofregionalism since
occurring
WorldWarII is themultilateral
frameworkin whichtheyarose.Mostcontemporary
PTAs have been established
undertheauspicesof theGATTIWTO,whichhas at-
113. Katzenstein1997b.
114. Buzan 1984.
115. Foran empiricalanalysisoftradecreation
andtradediversioncoveringtheseperiods,see Eichen-
greenandFrankel1995.
116. See, forexample,Nye 1971;andMansfield, Pevehouse,andBearceforthcoming.
117. Gilpin1975,235.
118. Atthesametime,verylittleevidencehasbeenaccumulated onthisscore.Although a considerable
amountofrecentworkhas addressedtheeffects oftradeflowson interstate farless attention
conflict, has
beenpaidtotheinfluence ofinstitutions
(bothregionalandmultilateral)
designedtoguidetrade.Forsome
earlierresearchbearingon therelationship
betweenregionaleconomicarrangements and conflict,see
Haas 1958; andNye 1971.For an overviewoftheliteratureon therelationship
betweentradeflowsand
conflict,
see McMillan1997.

tempted todampentradediversion bylimiting members' ability todiscriminateagainst

But theGATT's successin fostering
thirdparties.119 trade-creating PTAs has been
qualified.Manyarrangements formedby itseconomically less-developed members
havebeenhighly andeventheextent
protectionist, towhichthosepreferential group-
ingsestablished amongitsdevelopedmembers havebeenwelfareenhancing is the
subjectofconsiderable dispute.
Furthermore, theabsenceof multilateral management has notalwaysled to the
formation of discriminatory regionalarrangements. The liberaltrading orderof the
nineteenth century was constructed on a bilateraland regionalbasis lackingany
multilateralfoundation. Also,Irwinpointsoutthattheeconomicandpoliticaldam-
age causedby tradeblocs formedin the1930smighthavebeenameliorated if the
LeagueofNationshadnotinsistedon trying topromote themultilateral organization
ofcommerce.120 In thesamevein,Oye arguesthatregionalism "preserved zonesof
openness"earlyin thatdecadeandthatdecentralized and "discriminatory bargain-
ingwas an important forceforliberalization"duringitsmiddleandend.121
ArticleXXIV oftheGATToutlinestheconditions underwhichstatesarepermit-
tedtoestablish regionalintegration
arrangements. Itsstipulation thatPTAseliminate
internaltradebarriers anditsprohibition on increasesin theaveragelevelof mem-
bers'externaltariffsdo notprecludethepossibility oftradediversion. 122ButEichen-
greenand Frankelnotethatthelatterprohibition "explicitlyrulesout Krugman's
concern"abouta beggar-thy-neighbor tradewararisingin systemscomposedof a
fewlargePTAs.123To theextentthatsucha systemhas beenemerging, theGATT/
WTO,therefore, mayhaveanimportant roletoplayinaverting whatcouldotherwise
be a destructivewaveofregionalism.
Provisionsforforming PTAs weremadeat thetimeoftheGATT'sestablishment
becauseit was apparent thatthisbodywouldbe hard-pressed to forbidstatesfrom
doingso. In addition, somedecisionmakersseemedto believethattheprovisionin
ArticleXXIV tocompletely eliminatetradebarriers within PTAswouldcomplement
GATT initiatives to promotemultilateral openness.124Indeed,partiesto theGATT
mayhaveestablished PTAs at sucha rapidrateduringthepastfifty yearsbecause
theyviewedregionalliberalization as a stepping-stone to multilateral liberalization,
a centralpremiseofthosewhobelievethatpreferential groupings willserveas build-
ingblockstoglobalopenness.Alternatively, GATTmembers mayhaveformed such
arrangements tohelpoffset progressivelydeepercutsin protection madeat themul-
tilateral
leveland to protect uncompetitive sectors.A chieffearof thosewho view
PTAs as stumbling blocksto multilateralliberalizationis thatarrangements formed
forthesereasonswilldiverttradeandundermine future efforts atmultilateralliberal-
ization.
andFrankel1995;andFinger1993.
119. See Bhagwati1991,chap.5, and 1993;Eichengreen
120. Irwin1993.
121. Oye 1992,9.
122. Bhagwati1993,35-36.
124. See Bhagwati1993;andFinger1993.

614 International
Organization
Besidesattempting toregulatetheformation ofPTAs,theGATThas madeefforts

to managestrategic interdependence amongthem.Preferential arrangements have
formed in reactionto one another throughout each wave ofregionalism. Duringthe
nineteenth century,thistendency was prompted bystates'desireto obtainaccess to
MFN treatment. Doingso required themtoenterthenetwork ofbilateral
commercial
arrangements undergirding thetradingsystem,whichgenerated increasesinthenum-
berof thesearrangements and countriesthatwerepartyto one.125Throughout the
interwar period,PTAs formedin reactionto each otherdue largelyto mercantilist
policiesandpoliticalrivalries amongthemajorpowers.126
Strategic interactionhas continuedtoguidethedevelopment ofPTAssinceWorld
War11.127It has beenargued,forexample,thatEFTA was createdin responseto the
EEC; the latteralso spurredvariousgroupsof LCDs to formregionalarrange-
ments.128Furthermore, NAFTA has stimulated theestablishment of bilateraleco-
nomicarrangements in theWesternHemisphereand in theAsia-Pacificregionas
well as agreements to concludeothers.129Yet contemporary PTAs have formedin
reactionto each otherfordifferent reasonsthanbefore:GATT membershave not
established themto obtainMFN treatment, andtheyarenottheproducts ofmercan-
tilistpolicies.
Amongtheexplanations offeredforthisrecenttendency is thata PTA'sestablish-
mentcan prompt fearsby thirdpartiesthatitwillundermine theircompetitiveness,
thereby inducing themtoforma rivalbloc.Similarly, a stateentering anexistingPTA
mayprovokeconcernon thepartofitseconomicrivalsthattheywillbe placedat a
competitive disadvantage ininternationalmarkets,unlesstheyrespondinkind.Even
if statesare noteconomicrivals,theperception thata regionaleconomicarrange-
mentis benefiting memberscan lead otherstatesthatare anxiousto reap similar
gainstojoin a PTA.130 In addition, PTAs mightformandexpandin reactionto one
anotherbecause theyusuallyhave moreaggregatemarketpowerand thusmore
bargaining powerthantheirconstituent members.131VariousLatinAmericancoun-
tries,forexample,established PTAsoverthepastdecadetoimprove theirleveragein
negotiations withtheUnitedStatesandNAFTA.Likewise,theEEC's originalmem-
bersbelievedthatitscreationwouldenhancetheirbargaining powerin negotiations
withtheUnitedStates,and participants in theCentralEuropeanFree TradeArea
125. Irwin1993,97.
126. See, forexample,Buzan 1984;Condliffe 1940;andEichengreen andFrankel1995.
127. See de Melo and Panagariya1993,5-6; Femrnndez 1997; Mansfield1998; Oye 1992; Pomfret
1988;andYarbrough andYarbrough 1992.
128. Pomfret 1988,161,178.
129. Forexample,Serraetal. 1997,8-9. Also consistent
withtheseviewsis evidencelinkingthedepth
ofintegrationwithin
PTAstotheestablishment ofcompeting economicblocs.Forexample,Bhagwatiand
FemrnndezsuggestthatheightenedEuropeanintegration contributed to thecreationofNAFTA; andOye
andSandholtzandZysmanpointoutthatNAFTAs formation prompted additional
integration
withinthe
EU. See Bhagwati1991,72; Fernandez1997, 16-19; Oye 1992, 164-65; and Sandholtzand Zysman
1989.
130. See Pomfret1988;andYarbrough andYarbrough 1992.
131. See Femrnndez1997;andOye 1992.

hopedits formation
wouldbolstertheirabilityto negotiateentranceintotheEC/
EU. 132
Although thegrowth ofregionalarrangements hasbeenmarkedbya "contagion"
effectthroughouteach wave we have analyzed,farless damagehas accruedto the
international
trading
systemas a resultduringthepost-World WarII erathanduring
the1930s.Besidescertainfactorsdiscussedearlier,theGATThelpedto limitsuch
damagebyrestricting (albeitwithvarying degreesof success)theabilityofpartici-
pantsto formhighlydiscriminatory tradeblocs. Moreover,because thereis little
chanceof creatinga systemcomposedof "open" bilateralagreements, like that
whichexistedduringthenineteenth century,theWTO's capacityto managethe
recentcascadeofPTAswillcontinue tobe animportant determinantofregionalism's
cast.Justhow important theGATT has been and theWTO will be is thetopicof
substantial
disagreement.So is whether ofPTAs is placingincreas-
theproliferation
ingpressureon theWTO,an issuethathas stimulated muchoftherecentresearchon
regionalism.
A relatedsetofissuespertain
towhether themultilateral
framework thathasguided
international
economicrelations sinceWorldWarII has coloredtheeffects ofpower
on regionalism.
relations WouldtheUnitedStateshavebehavedin a morepredatory
fashionand wouldPTAs consequently have a morediscriminatory tenorif itseco-
nomicdeclinehad occurredoutsidea multilateral setting?To whatextenthas the
GATT/WTOreducedthescope fortradediversionand conflict betweenPTAs by
mutingits members'abilityto use regionalarrangements as mercantilist instru-
ments?Answering thesequestions(andmanyothersraisedearlier)requiressystem-
aticempiricalresearchon thelinksbetweeninternational politicsand regionalism
thathasbeensorelylackingtodate.
VariationsAmongRegionalInstitutions
Thusfar,we have analyzedPTAs as a whole,without focusingon thedifferences

amongthem.Yetitis clearthatall regionaltradeinstitutions
areneithercreatedequal
norequallysuccessfulin meeting theirstatedobjectives.Significant
variationsexist
in boththeinstitutional
designof PTAs and thedepthof integration theyfoster.A
numberof recentefforts have been madeto assess thepoliticalcauses and conse-
quencesofthesedifferences.
The depthof integration withina PTA dependson economicfactors, including
members' levelsofeconomicdevelopment andtheextentto whichtheireconomies
are complementary.133
It also hingeson manyof thepoliticalfactorsthatinfluence
theformationofPTAs,as we havesuggested throughoutthisarticle.Butin addition,
theinstitutional
designof a regionalarrangement affectsthedegreeof integration
amongparticipants.Forexample,someobservers arguethatan inverserelationship
132. See Haggard1997;andWhalley1998,72.

133. See Balassa 1961;Fischer1993;Foroutan1993;andNogu6sandQuintanilla
1993.

616 International
Organization
existsbetweenthenumber ofpartiestoa PTAandthedepthofeconomicintegration

withinit. Deeper integration is moreeasilyattainedif statessharean interest in
economicliberalization; all else equal,theheterogeneity ofmembers' preferences is
likelytoincreaseas thenumber ofmembers grows.134Forthisreasonandbecauseof
collectiveactionproblems, forming a smallPTA is easierthanforming a largeone,
regardlessofthelevelofintegration eventuallyattained.135Large,highlyintegrated
PTAs can be established. However,rather thantrying to do so fromscratch, George
W. Downs,David M. Rocke,andPeterN. Barsoomsuggestthatitis moreeffective
to createa smallerPTA composedof stateswitha preference forliberalizingeco-
nomicrelationsand thentakeon additionalmembersincrementally-precisely the
strategytheEC/EUhas followed.136
Another setofdesignfeatures acrossPTAsis theextent
thatdiffers ofthecommer-
cial preferences granted to members, whethertheyimposea CET, and whether the
arrangement explicitly coversissue areas otherthantrade(forexample,monetary
relationsandimmigration and environmental policy).Economistshavehighlighted
thewelfareconsequencesof theseinstitutional variations.137But such differences
also havebeenlinkedtosomeofthepoliticalfactors we discussedearlier, thoughthe
existingliterature on theseissues remainsquite small. BernardHoekmanand
MichaelLeidy,forexample,arguethatcustomsunionsare likelyto yieldgreater
protectionthanFTAs.'38Customsunionsseta CET, anditmaybe easierforprotec-
tionistgroupsto allyacrossstatesto raiseitthanto forgean allianceto raisetariffs
independently setbyeach member. In addition,
partiesto an FTA havean incentive
toengageincompetitive tradebarrier sincedoingso willpromote
reductions, foreign
investment and exports.Thus,manyanalystsarguethatdynamicprocessespropel
reductions in external tariffsunderan FTA,whereasa customsunionis likelyto set
itsCET justhighenoughtoprotect itsleast-efficient
members.139
On theotherhand,politicalfactors mayrender customsunionspreferable toFTAs
and otherpreferential arrangements thatdo notimposea CET. Countriessetting
tradebarriers collectivelycan dilutethepoliticalinfluence of protectionist interest
groupsin anygivenmember. Bothadministrative costsand thelevel of protection
maybe higherin an FTAthanin a customsunion,sinceelaboraterulesoforiginand
content requirements arenecessaryto enforcetheformer typeofagreement.140 Like
134. On thispoint,see de Melo,Panagariya, andRodrik1993;Downs,Rocke,andBarsoom1998;and

Haggard1997.
135. See de Melo,Panagariya, andRodrik1993;andOlson 1993.
136. Downs,Rocke,andBarsoom1998.
137. See, forexample,de Melo, Panagariya, and Rodrik1993, 171-75; and Frankel,Stein,andWei
1995. One especiallyinteresting findingis that,althougheliminatingtradebarriers
amongmembersis
likelyto promote economicintegration, less dramatic ofthesebarriers
reductions oftenarepreferableon
economicgrounds.
138. HoekmanandLeidy1993,239.
139. See de Melo,Panagariya, andRodrik1993,171-74;andWonnacott 1996,92-95.
140. As Wonnacott explains,"because an FTA allows each memberto set its own tariffon outside
countries,it requiresrulesof origin(ROOs). Otherwise, therewouldbe an incentivefortradedeflec-
tion-thatis, imports wouldcomeintotheFTA through thelow-tariff
countryandbe transshippedduty-
freeintothehigh-tariff country."For discussionsof whycustomsunionsaremoredesirablethanFTAs
because ROOs in thelattertendto be protectionist, see Wonnacott1996, 90-91; and Krueger1995.

theformation ofPTAs,moregenerally, boththedomesticandtheinternational politi-

cal environment arelikelytoshapewhichtypeofarrangement stateschoosetoform.
How theydo so hashardlybeenexploredandis a fruitful avenueforfurther research.
A finaldesignfeature thatvariesamongPTAsis theirinstitutional density.Grieco
maintains thattheinstitutionalizationofeconomicrelations can be comparedacross
threedimensions: (1) thelocus of institutionalization,(2) thescope of activity, and
(3) thelevelofinstitutional Recently,
authority.141 scholarshaveexpressedparticular
interestin whycertainregionsdisplaya highdegreeof institutionalization (forex-
ample,Western Europe)butothers do not(forexample, Asia). Onepossibility stressed
byeconomists andpoliticalscientistsfordecades-and widelycriticized oflate-is
thatmorehighly institutionalized
arrangements ariseas functional responses tointen-
sifiedintegrationamongtheconstituent states.142Another possibility,suggestedby
Miles Kahler,is thattheextentofinstitutionalization dependson thepreferences of
policymakers and interest groupsas well as bargaining amongPTA members.143
Griecoadvancesa thirdpossibility. As notedearlier,he arguesthatinstitutionaliza-
tionwillbe forestalled when"less powerful countries in a regionhaveexperienced
or areexperiencing a significant
deteriorationin theirrelativecapabilities"because
oftheirconcerns"thattheenhancement ofregionaleconomictiesbrought aboutby
institutionalization
[will]accentuate regionalimbalancesincapabilities evenfurther
in favoroftherelatively strongerpartners."144 In his view,forexample,theweaker
countries of SoutheastAsia are likelyto oppose theestablishment of formaleco-
nomicinstitutions, whereasthestronger powers,especiallyJapan,arelikelytopress
fortheirdevelopment.
In contrasttoGrieco'sargument, however, Katzenstein pointsoutthat"todayitis
Chinaand Japanwho opposerapidmovestowarda formalinstitutionalization of
regionalintegration," whereasweakerpowerslike themembersof ASEAN seek
stronger Moreover,a wide varietyof scholarsattribute
institutions.145 thelack of
formalinstitutions in EastAsia to factorsotherthanlocal powerrelations. PeterA.
Petrinotesthat"thedevelopment ofregionalinstitutions [inAsia] is complicated by
boththegreatdiversity oftheregion'scountries andbythepreferences ofmanyof
theregion'scountries forinformal, negotiated (as opposedto formal, legalistic)ap-
proachesto policy."1146 Haggardand Katzenstein emphasizeAsia's commitment to
"open regionalism," whichimpliesa desirefornondiscriminatory tradepractices
and a willingness to acceptnew members, differing sharplyfromthemoreclosed
varietyof regionalism thatmarksEuropeandtheAmericas.147Thiscommitment is
oftenseenas a function ofthehighlevelsofeconomic,political,andcultural hetero-
geneity inAsia andtheregion'srelationship withtheUnitedStates.
141. Grieco1997.
142. Fora discussionofthisliterature,
see Kahler1995.
143. Ibid.
144. Grieco1997,176.
145. Katzenstein1997a,23.
146. Petri1993,43.
147. See Haggard1997;andKatzenstein 1997a.

618 International
Organization
Katzenstein proposessomeadditionalreasonsfortheweakinstitutionalization of
Asianeconomicrelations. 148First,
afterWorldWarlI theUnitedStatespromoted the
principlesofbilateralism inAsia andmultilateralism inEurope.Second,theconstruc-
tionof a collectiveidentity facilitates
theestablishment of formalregionalintegra-
tion,andpoliticalactorsinAsia havenotsubscribed totheidea ofcreatinga distinct
community. Finally,thedistinctive characterofAsianstateshindersthecreationof
regionalinstitutions.
He maintains thatthe"network character"ofthesestates,their
emphasison consensusbuilding,and theconvergence betweenpublicand private
spheresin domesticpoliticsdifferentiate themfromEuropeancountries andrender
themless likelytodevelopformalregionalinstitutions.
Althoughaspectsof theseinstitutional variations have been studiedintensively,
theirinternationalpoliticaland economicimplications havereceivedfarless atten-
tionthanis warranted. Thatthereare economicgainsfromintegration is obvious.
Buteconomists remaindividedoverwhether partially reducingtradebarrierswithin
a PTAyieldsgreater staticbenefits thancompletely eliminatingthem,andverylittle
researchhas been conductedon theconsequencesof differences in thedegreeof
withinPTAs forthestability
liberalization ofthemultilateral tradingsystem. More-
over,whilegreaterintegration mightinhibithostilities amongPTA members-for
example,byraisingthecostsof disrupting traderelations-theeffects ofvariations
in integrationon politicalconflictandcooperation havenotbeenexaminedin suffi-
cientdepth.
The degreeof regionalinstitutionalization maybearon bothissues.If different
preferential
groupings developuniquesetsofrulesandpractices thatareatoddswith
multilateralarrangements, thentheliberaltrading ordercoulderodeandcommercial
conflictsbetweenPTAs coulderupt.This prospectshouldnotbe dismissedoutof
hand,sincecountries sometimes prefertoorganizeeconomicrelations on a regional
ratherthana multilateral basis preciselybecauseit allowsthemto selectan institu-
tionaldesignthatmeetstheirspecificneeds.149 Butit also shouldnotbe overstated.
To date,thereis littleevidencethatinstitutional differencesamongPTAs havecon-
tributedto significant commercial conflicts
or substantiallyweakenedtheinterna-
tionaltrading system.
Conclusions
Therecent ofPTAshasspurred
proliferation considerable ineconomicregion-
interest
alism,butexisting hasproducedlittleconsensuson itssourcesandimplica-
research
toresolvetheseissueshavebeenhampered
tions.Efforts bydisagreements aboutthe
definition
ofa regionandofregionalism as wellas cross-regional
andintertemporal
variations
thatlimithowwidelygeneralizationscan be drawn.However,manysuch
effortshavealso beenhindered by thewidespreadtendency to place littlestresson
148. Katzenstein
1997a.
149. Forexample,Yarbrough
andYarbrough
1997.

thepoliticalunderpinnings of regionalism. Overthepastdecade,therehas been a

growing recognitionthatthepropensity ofcountries toenterPTAs,thepaceofregion-
alism,anditswelfareimplications dependon politicalconditions. Although thebur-
geoningliterature emerging on thesetopicshasnotestablished eitherwhichpolitical
factorsaremostimportant ortheexactnatureoftheireffects, ithas established that
analysesoperating ina politicalvacuumriskarriving atmisleading conclusions about
thecausesandconsequencesofregionalism.
Whataresomeofthekeyfindings arisingfromthisresearch andthekeyquestions
thatremainunresolved? First,existing workindicatesthatthepreferences andpoliti-
cal influence societalgroupsarelikelyto affect
of different whether a stateentersa
PTA as wellas whichsectorsarecoveredbythearrangement andwhether itcreates
ordiverts trade.Protectionist groupshavean incentive topressfortheestablishment
of PTAs thatdiscriminate in theirfavor,and government officialsthatdependon
protectionistinterestsforpoliticalsupport havean incentive torespondtosuchpres-
sures.Export-oriented interestsmayalso support entering a PTA,ifdoingso grants
themexpandedaccesstovitalforeign markets within theblocorreducestheprospect
thattheiraccesstothesemarkets willbe disrupted inthefuture.
In practice,however, itmaybe difficult to construct PTAs thatmeetthedemands
of bothimport-competing and export-oriented interests in prospectivemembers,
thereby limiting thescopefortheirformation. Furthermore, thoughrecentstudiesof
regionalism emphasizing societalfactors suggestthattheeconomiccastofPTAswill
dependheavilyon theinterests and politicalinfluence of groupsin memberstates,
thetheoretical andempiricaltoolsneededto maketheseassessments requirerefine-
ment.Moregenerally, thisbodyofresearchhas notyetresolvedexactlywhichseg-
mentsof societyare mostlikelyto supportregionaltradeinitiatives as opposedto
unilateralor multilateralones,whoseinterests theseinitiatives serve,and whether
commercial regionalism heightens or undermines thesupportof variousgroupsfor
multilateralliberalization.
Second,thepreferences ofgovernment officials andthenatureofdomesticinstitu-
tionsinfluence theestablishment and economiceffectsof PTAs. Of late,certain
governments haveoptedto entera PTAbecausedoingso seemedlikelyto facilitate
moreextensivecommercialliberalization thanunilateralor multilateral strategies
wouldpermit, giventhenatureof domesticinstitutions and theinterests of potent
segments ofsociety.In thesamevein,thelatestwaveofregionalism hasbeenmarked
bycases whereaccessiontoa PTAwas usedtofacilitate liberaleconomicandpoliti-
cal reforms and to dilutethepoliticalefficacy of societalgroupsthatopposedsuch
changes.Butthough thepreferences ofgovernment officialsandthenatureofdomes-
ticinstitutionsclearlyhave affected efforts at regionalintegration, preciselywhich
institutionalconditions promote regionalism has notbeenestablished. Norhaveex-
istingstudiesidentified theconditions underwhichPTA membership is mostlikely
to stimulatedomesticreform. Equallyimportant is theneedto morefullyintegrate
societalandstatist modelsofregionalism. Mostanalysesoftherelationship between
domesticpoliticsand regionalism have emphasizedeithersocietalor institutional
factors.However,theeffects ofeachfactor on theestablishment andeconomicimpli-

620 International
Organization
cationsofa PTAarelikelytodependheavilyon theother, an issuethathas received

littleattention.
Third,boththeformation ofregionaltradearrangements andtheirconsequences
hingeon international politicalconditions. Muchrecentinterest has beenexpressed
in whether decliningU.S. hegemony has contributed to thelatestwave ofregional-
ism.Although theavailableevidencesuggeststhatPTAsdidbecomemorepervasive
as hegemony eroded,whatunderlies thisrelationship, howitbearson regionalism's
welfareconsequences,and whether recedinghegemonyaffected priorepisodesof
regionalism remainmatters of dispute.Less widelyanalyzedof late,butcentralto
variousearlierstudies,are thelinksbetweenPTAs and interstate powerrelations.
Due to theseeffects, forexample,stateshavegreater incentives to enterPTAs with
theiralliesthanwiththeirfoes,whichmayhelpto explainwhytheCold War'send
and theattendant changesin international securityrelationshave coincidedwith
regionalism's growth duringthepastdecade.Furthermore, duringearliereras,PTAs
wereoftenusedbylargerstatestoheighten theeconomicandpoliticaldependence of
smallercountries and by groupsof statesto reducetheircollectivedependenceon
third parties.Therarity withwhichPTAshavebeenactivelyusedforsuchmercantil-
istpurposesduringthecontemporary wave of regionalism is noteworthy and war-
rantsfurther attention.
Fourth,theperiodsinceWorldWar II is thefirstto experiencethegrowthof
regionalism withinthecontextofa multilateral tradesystem. All buta fewmembers
oftheWTO currently belongtoa PTAanditis centrally important todetermine why
itsmembers oftenchoosetopursueregionaltradeinitiatives rather thanrelying solely
on multilateral initiatives.
One possibility is thattheyviewPTAsas a complement to
multilateral liberalization;another is thattheyviewregionalandmultilateral liberal-
izationas substitutes. This issue lies at theheartof contemporary debatesabout
whether PTAs will be buildingblocksor stumbling blocksto greatermultilateral
openness,and existingresearchon thepoliticaleconomyof regionalism has done
littletoresolveit.Equallyimportant arequestionspertaining towhatroletheGATT/
WTO has playedin managingthespreadofregionalism. Thereis fairlywidespread
agreement thattheGATTIWTOhashelpedtolimittheemergence ofhighlydiscrimi-
natory blocsandto managestrategic interactionamongPTAs.Butexactlyhowim-
portant theGATTIWTO'srolehas beenin thesematters and whether PTAs would
have been substantially morediscriminatory in its absenceare morecontentious
topics.
Fifth, important institutional
differences existamongPTAs,including thenumber
of members involved,theextentof thepreferential treatment theygrantmembers,
whether theyimposea CET, andtheirinstitutional density. Some analysesofthese
variations centeron domesticfactors, suchas theprevailing character ofpolicynet-
worksat homeand thepreferences of interest groupsand nationalpolicymakers.
Othersfocuson international factors,including powerrelations, strategicinteraction
amongmembers, andtheirpoliticalandeconomicrelations withthirdparties.How-
ever,existingresearchon thepoliticalconditionsshapingthedesignof regional
institutions is largelysuggestive. Moreover,thepoliticalconsequencesof different

institutionalformsare surrounded moreby debatethanby theoryor evidence.The

politicalsourcesand effectsof institutional variationsacrossPTAs represent an
understudied andespeciallyfertile groundforfuture research.
In thisarticle,we haveoutlinedsomeofthewaysthatpoliticalfactors haveinflu-
encedtheformation and effectsof PTAs. The recentliterature surveyed hereoffers
somekeyinsights intotheserelationships. The politicalunderpinnings ofregional-
ism,however,remainmurky, and theneed foradditionalresearchon thistopicis
glaring. Notonlywillsuchresearch producea better understanding ofregionalism, it
is also likelyto contribute to broaderissuesin thefieldof international relations,
including thepoliticaleconomyof nationalsecurity, thedomesticandinternational
sourcesofforeign economicpolicy,andthefactors influencingthedesignandstrength
ofinteinational institutions.
One areawe havenotdiscussedbutthatmerits greater attentionis financialregion-
alism.As tradeflowshaveincreasedoverthepostwarperiod,so haveinternational
capitalflows.Althoughit is commonly acceptedthatinternational capitalmobility
hasgrownsignificantly, theextent ofregionalism infinancial markets is morecontro-
versialand less widelystudied.'50The relationship betweenfinancial and commer-
cial regionalism is anotherunderstudied issue.The experienceof theEU, wherea
commonmarketprecededthecreationof a singlecurrency, suggeststhatthetwo
mightbe tightly related.151Additional workis neededtodetermine whether thesame
politicalfactors thatshapecommercial regionalism financial
also affect regionalism.
Thecurrent waveofregionalism has arisenina differentcontext thanearlierones.
Unlikepriorepisodes,themostinfluential statein theglobal system(theUnited
States)is activelypromoting theformation ofPTAs.Furthermore, thecurrent wave
has occurredin theface of theCold War's conclusionand variousaccompanying
changesin theinternational politicalsystem.So far,regionalarrangements have
seldombeen used as instruments of powerpolitics;instead,theyhave oftenbeen
usedtopromote andconsolidatedomesticreforms thatliberalizemarkets andfoster
democracy. Andthepace ofregionalism has accelerated duringa periodmarkedby
substantial economicinterdependence, a desireby countries to mediatetradedis-
putes,anda multilateral framework thatfacilitates
suchmediation andtheorganiza-
tionofcommercial In ourview,thissetofpoliticalconditions
relations. has contrib-
utedsignificantly totherelatively benigncharacter ofthecurrent waveofregionalism.
Thereis a widespread beliefthatthiscurrent wavewillpersist.Farless consensus
existson whether it shouldbe embraced.Many scholarsand policymakers view
regionalism as a stepping-stone to greaterglobalopenness,an outcomenotwithout
historicalprecedent: Duringthesecondhalfofthenineteenth century, an openinter-
nationaltradingsystemwas forgedlargelythrough bilateralagreements and owed
littleto multilateral cooperation.152Variousobserversalso view comparisons with
theinterwar periodas beingoverdrawn. But fearsthatregionalism will strainthe
150. See, forexample,Frankel1993;Eichengreen

andFrankel1995;andCohen1998.
151. Forexample,Milner1997,102.
152. Forexample,Irwin1993,91.

622 International
Organization
tradingsystemare notwithoutmerit.We have discusseda numberof

multilateral
domesticandinternational politicalreasonsfortheestablishmentoftrade-diverting
PTAs and identified some conditionsunderwhichsuch alTangements could limit
systemicopenness.Further researchis therefore
neededtoidentify thedomesticand
international underwhichregionalism's
politicalconditions effects
aremostlikelyto
be benignorpernicious. A morenuancedunderstanding oftheseissueswillbe espe-
ciallyimportantforpolicymakers as theytrytopreventthecurrentwaveofregional-
ismfromfragmenting theglobaleconomy.
References
Aitken,NormanD. 1973.The Effectof theEEC andEFTA on EuropeanTrade:A TemporalandCross-

SectionAnalysis.American EconomicReview63 (5):881-92.
Anderson, Kym,andRichardBlackhurst. 1993.Introduction andSummary. In RegionalIntegration
and
theGlobal TradingSystem, editedby KymAndersonand RichardBlackhurst, 1-15. London:Har-
vesterWheatsheaf.
Anderson, Kym,andHege Norheim.1993.History, Geography, andRegionalEconomicIntegration. In
RegionialIntegration and theGlobal TradingSystem, editedby KymAndersonand RichardBlack-
hurst,19-51. London:Harvester Wheatsheaf.
Bagwell,Kyle,and RobertW. Staiger.1997. Regionalismand Multilateral TariffCooperation.NBER
Working Paper5921. Cambridge, Mass.: NationalBureauofEconomicResearch.
Balassa,Bela A. 1961.TheTheoryofEconoomic Integration.
Homewood,Ill.: Irwin.
Baldwin,DavidA. 1985.EconomicStatectaft. Princeton,N.J.:Princeton University
Press.
Baldwin,RichardE., andAnthony J.Venables.1995. RegionalEconomicIntegration. In Handbookof
International Economics,Vol. 3, editedbyGeneM. GrossmanandKennethRogoff,1597-1644.Am-
sterdam: Elsevier.
Baldwin,RobertE. 1993.AdaptingtheGATTto a MoreRegionalizedWorld:A PoliticalEconomyPer-
spective.InRegionalIntegration andtheGlobalTradingSystem, editedbyKymAnderson andRichard
Blackhurst, 387-407.London:Harvester Wheatsheaf.
Bhagwati,Jagdish.1968.TradeLiberalization AmongLCDs, TradeTheory,and GATTRules.In Value,
Capital,and Growth:Essaysin HonourofSir JohnHicks,editedbyJ.N. Wolfe,21-43. Edinburgh:
University ofEdinburgh Press.
1991.TheWorldTradingSystem at Risk.Princeton,N.J.:PrincetonUniversityPress.
1993.RegionalismandMultilateralism: An Overview.In NewDimensionsinRegionalIntegra-
tion,editedbyJaimede Melo andArvindPanagariya, 22-51. New York:Cambridge UniversityPress.
Bhagwati,Jagdish,and ArvindPanagariya.1996. Preferential TradingAreas and Multilateralism-
Strangers, Friends,or Foes? In TheEconomicsofPreferential TradeAgreements, editedby Jagdish
BhagwatiandArvindPanagariya, 1-78.Washington, D.C.: AEI Press
Birch,Melissa H. 1996. EconomicPolicyand theTransition to Democracyin Paraguay.In Economic
Policyand theTransition to Democracy:The LatinAmericanExperience,editedby JuanAntonio
MoralesandGaryMcMahon,166-90.NewYork:St.Martin'sPress.
Bond,Eric,and Constantinos Syropoulos.1996a.TradingBlocs and theSustainability of Interregional
Cooperation. In TheNewTransatlantic Economy, editedbyMatthewB. Canzoneri, Wilfred J.Ethier,
andVittorio Grilli,118-41.Cambridge: Cambridge UniversityPress.
1996b.The Size ofTradingBlocs: MarketPowerandWorldWelfareEffects. JournalofInterna-
tionalEconomics40 (3-4):411-37.
Busch,MarcL., andHelenV. Milner.1994.The FutureoftheInternational TradingSystem:International
Firms,Regionalism, and DomesticPolitics.In PoliticalEconomyand theChangingGlobal Order,
editedbyRichardStubbsandGeoffrey R. D. Underhill,259-76. New York:St.Martin'sPress.

Buzan, Barry.1984. EconomicStructure and International Security:The Limitsof the LiberalCase.

International Organization 38 (4):597-624.
Cohen,BenjaminJ. 1997. The PoliticalEconomyof Currency Regions.In The PoliticalEconomyof
Regionalism, editedbyEdwardD. MansfieldandHelenV. Milner,50-76. New York:ColumbiaUni-
versity Press.
. 1998.TheGeography ofMoney.Ithaca,N.Y: CornellUniversity Press.
Condliffe, J.B. 1940.TheReconstruction of WorldTrade.NewYork:W.W. Norton.
Cooper,CharlesA., andBentonF. Massell.1965a.A New Look atCustomsUnionTheory.TheEconomic
Journal75:742-47.
. 1965b.Towarda GeneralTheoryofCustomsUnionsforDevelopingCountries. JournalofPo-
liticalEconomy73 (5):461-76.
de Melo,Jaime,andArvindPanagariya.1993.Introduction. In NewDimensionsinRegionalIntegration,
editedbyJaimede Melo andArvindPanagaliya,3-21. NewYork:Cambridge UniversityPress.
de Melo,Jaime,ArvindPanagariya, andDani Rodrik.1993.The New Regionalism: A Country Perspec-
tive.In New Dimensionsin RegionalIntegration, editedby Jaimede Melo andArvindPanagariya,
159-93.NewYork:Cambridge University Press.
Deutsch,KarlW.,SidneyA. Burrell, RobertA. Kann,MauriceLee, Jr.,MartinLichterman, RaymondE.
Lindgren, FrancisL. Lowenheim, andRichardW. VanWagenen.1957.PoliticalCommunity and the
NorthAtlantic Area.International Organization intheLightofHistoricalExperience. Princeton,N.J.:
Princeton University Press.
Downs,GeorgeW.,DavidM. Rocke,andPeterN. Barsoom.1998.ManagingtheEvolutionofMultilater-
alism.International Organization 52 (2):397-419.
Eichengreen, Barry, andJeffreyA. Frankel.1995.EconomicRegionalismii: EvidencefromTwoTwentieth-
Century Episodes.NorthAmerican JournalofEconomicsand Finance6 (2):89-106.
Farber,HenryS., and JoanneGowa. 1997. CommonInterests or CommonPolities?Reinterpreting the
Democratic Peace. JournalofPolitics59 (2):393-417.
Fernandez, Raquel. 1997.Returns to Regionalism: An EvaluationofNon-Traditional GainsfromRTAs.
NBER Working Paper5970.Cambridge, Mass.: NationalBureauofEconomicResearch.
Finger,J.Michael.1993.GATT's Influence on RegionalArrangements. In NewDimensionsinRegional
Integration,editedbyJaimede Melo andArvindPanagariya,128-48.New York:Cambridge Univer-
sityPress.
Fischer,Stanley.1993. ProspectsforRegionalIntegration in theMiddleEast. In New Dimensionsin
RegionalIntegration, editedbyJaimede Melo andArvindPanagariya, 423-48. NewYork:Cambridge
University Press.
Fishlow,Albert,and StephanHaggard.1992. The UnitedStatesand theRegionalization of theWorld
Economy.Paris:OECD Development CenterResearchProjecton Globalization andRegionalization.
Foroutan, Faezeh. 1993.RegionalIntegration in Sub-Saharan Africa:Past Experienceand FuturePros-
pects.In NewDimensionsin Regionial Integration, editedby Jaimede Melo andArvindPanagariya,
Frankel,Jeffrey A. 1993.Is JapanCreatinga Yen Bloc in EastAsia andthePacific?In Regionalism and
Rivalry:Japanand theUnitedStatesin PacificAsia, editedbyJeffrey A. FrankelandMiles Kahler,
53-85. Chicago:University ofChicagoPress.
Frankel, A., andShang-Jin
Jeffrey Wei. 1998.Regionalization ofWorldTradeandCurrencies: Economics
and Politics.In TheRegionalization of theWorldEconomy,editedby Jeffrey A. Frankel,189-219.
Chicago:University ofChicagoPress.
Frankel,Jeffrey, ErnestoStein,andShang-Jin Wei. 1995.TradingBlocs andtheAmericas:The Natural,
theUnnatural, andtheSuper-Natural. JournalofDevelopment Economics47 (1):61-95.
Frieden,Jeffry A. 1991. InvestedInterests: The Politicsof NationalEconomicPolicies in a Worldof
GlobalFinance.International Organization 45 (4):425-51.
Gilpin,Robert.1975. U.S. Powerand theMultinational Corporation: ThePoliticalEconomyofForeign
DirectInvestment. NewYork:Basic Books.
. 1987. ThePoliticalEconomyofInternational Relations.Princeton,N.J.:PrincetonUniversity
Press.

624 International
Organization
Gowa,Joanne.1994.Allies,Adversaries, and International Trade.Princeton, N.J.:Princeton University

Press.
Grieco,JosephM. 1997. SystemicSources of Variationin RegionalInstitutionalization in Western
Europe,EastAsia, andtheAmericas.In ThePoliticalEconomyofRegionalism, editedbyEdwardD.
Mansfield andHelenV. Milner,164-87.NewYork:ColumbiaUniversity Press.
Grossman,Gene M., and ElhananHelpman.1994. Protection by Sale. AmericanEconomicReview84
(4):833-50.
. 1995.ThePoliticsofFreeTradeAgreements. AmericanEconomicReview85 (4):667-90.
Gunter, FrankR. 1989. CustomsUnionTheory:Retrospect and Prospect.In EconomicAspectsofRe-
gionalTrading Arrangements, editedbyDavid Greenaway, ThomasHyclak,andRobertJ.Thornton,
1-30.NewYork:Harvester Wheatsheaf.
Haas, ErnstB. 1958. The Uniting ofEurope:Political,Social, and EconomicForces,1950-1957.Stan-
ford,Calif.:Stanford UniversityPress.
Haggard,Stephan.1997. Regionalismin Asia and theAmericas.In The PoliticalEconomyofRegion-
alism,editedby EdwardD. MansfieldandHelenV. Milner,20-49. New York:ColumbiaUniversity
Press.
Haggard,Stephan,and RobertR. Kaufman.1995. The PoliticalEconomyof DemocraticTransitions.
Princeton, N.J.:Princeton UniversityPress.
Haggard,Stephan,andStevenB. Webb,eds. 1994. Voting forReform: Democracy, PoliticalLiberaliza-
tion,andEconomicAdjustment. NewYork:OxfordUniversity Press.
Hine,RobertC. 1994.International EconomicIntegration. In Surveysin International Trade,editedby
David Greenaway andL. AlanWinters, 234-72. Oxford:Basil Blackwell.
Hirschman, Albert0. [1945] 1980.NationalPowerandtheStructure ofForeignTrade.Berkeley:Univer-
sityofCalifornia Press.
. 1981.EssaysinTrespassing: EconomicstoPoliticsandBeyond.Cambridge: Cambridge Univer-
sityPress.
Hoekman,Bernard,andMichaelLeidy.1993.Holes andLoopholesin Integration Agreements: History
andProspects.In RegionalIntegration and theGlobalTradingSystem, editedby KymAndersonand
RichardBlackhurst, 218-45. London:Harvester Wheatsheaf.
Hurrell,Andrew.1995.Regionalism inTheoretical Perspective.In Regionalism in WorldPolitics,edited
byLouiseFawcettandAndrewHurrell, 37-73. Oxford:OxfordUniversity Press.
Irwin,DouglasA. 1993.Multilateral andBilateralTradePoliciesin theWorldTradingSystem:An His-
toricalPerspective. In NewDimensionsinRegionalIntegration, editedbyJaimede Melo andArvind
Panagariya, 90-119.NewYork:Cambridge Press.
University
Johnson, HarryG. 1965.TheWorldEconomyat theCrossroads:A SurveyofCurrent ProblemsofMoney,
Trade,andEconomicDevelopment. Oxford:Clarendon Press.
Kahler,Miles. 1995. International Institutionsand thePoliticalEconomyof Integration. Washington,
D.C.: Brookings Institution.
Katzenstein, PeterJ. 1997a. Introduction: Asian Regionalismin Comparative Perspective.In Network
Power: Japanand Asia, editedby PeterJ. Katzensteinand TakashiShiraishi,1-44. Ithaca,N.Y.:
CornellUniversity Press.
, ed. 1997b.TamedPower:Germany inEurope.Ithaca,N.Y.: CornellUniversity Press.
Kemp,MurrayC., andHenryV. Wan,Jr.1976.An Elementary Proposition Concerning theFormation of
CustomsUnions.JournalofInternational Economics6 (1):95-97.
Kenwood,A. G., andA. L. Lougheed.1971. The GrowthoftheInternational Economy1820-1960:An
Introductory Text.London:AllenandUnwin.
Keohane,Robert0. 1984.AfterHegemony:Cooperationand Discordin theWorldPoliticalEconomy.
Princeton, N.J.:Princeton UniversityPress.
Keohane,RobertO., andJosephS. Nye. 1977.Powerand Interdependence: WorldPoliticsin Transition.
Boston:Little,Brown.
Kindleberger, CharlesP. 1973.TheWorldinDepression,1929-1939.Berkeley:University of California
Press.

1975.The Rise ofFreeTradein Western Europe,1820-1875.JournalofEconomicHistory35

(1):20-55.
Krasner,StephenD. 1976. StatePowerand theStructure of International
Trade.WorldPolitics28 (3):
317-47.
Krueger, Anne0. 1993.PoliticalEconomyofPolicyReform inDevelopingCountries. Cambridge, Mass.:
MIT Press.
. 1995.FreeTradeAgreements VersusCustomsUnions.NBER Working Paper5084. Cambridge,
Mass.: NationalBureauofEconomicResearch.
. 1997.ProblemswithOverlapping FreeTradeAreas.In RegionalismVersusMultilateralTrade
Arrangements, editedbyTakatoshiIto andAnne0. Krueger, 9-24. Chicago:University of Chicago
Press.
Krugman, Paul. 1991a.The Move to FreeTradeZones. In PolicyImplications of Tradeand Currency
Zones:A Symposium, sponsored bytheFederalReserveBankofKansasCity,7-41. KansasCity,Mo.:
FederalReserveBank.
1
l991b. EconomicGeography. Cambridge, Mass.: MIT Press.
1993. RegionalismVersusMultilateralism: AnalyticalNotes.In New Dimensionsin Regional
Integration, editedbyJaimede Melo andArvindPanagariya, 58-79. NewYork:Cambridge University
Press.
Kupchan,CharlesA. 1997.Regionalizing Europe'sSecurity: The Case fora New Mitteleuropa. In The
PoliticalEconomyofRegionalism, editedbyEdwardD. MansfieldandHelenV. Milner,209-38. New
York:ColumbiaUniversity Press.
Lake, David A. 1988. Power,Protection, and Free Trade:International Sourcesof U.S. Commercial
Strategy. Ithaca,N.Y: CornellUniversity Press.
Lawrence,RobertZ. 1996. Regionalism, Multilateralism, and Deeper Integration. Washington, D.C.:
Brookings Institution.
Linnemann,Hans. 1966. An EconometricStudyof InternationalTrade Flows. Amsterdam:North-
Holland.
Mansfield, EdwardD. 1998.The Proliferation ofPreferentialTradingArrangements. JournalofConflict
Resolution 42 (5):523-43.
Mansfield,EdwardD., and Rachel Bronson.1997. Alliances,Preferential TradingArrangements, and
International Trade.American PoliticalScienceReview91 (1):94-107.
Mansfield, EdwardD., and JackSnyder.1995. Democratization and theDangerof War.International
Security 20 (1):5-38.
Mansfield, EdwardD., JonC. Pevehouse, andDavidH. Bearce.Forthcoming. PreferentialTrading Arrange-
mentsandMilitary Disputes.SecurityStudies9 (1).
McKeown,Timothy J.1991.A LiberalTradingOrder?The Long-RunPattern ofImports totheAdvanced
Capitalist States.International
StudiesQuarterly 35 (2):151-72.
McMillan,SusanM. 1997.Interdependence andConflict. MershonInternational StudiesReview41 (1):
33-58.
Milner,HelenV. 1997.Industries, Governments, and theCreationof RegionalTradeBlocs. In ThePo-
liticalEconomyofRegionalism, editedby EdwardD. Mansfieldand HelenV. Milner,77-106. New
York:ColumbiaUniversity Press.
Moravcsik,Andrew.1998. The Choicefor Europe:Social Purposeand StatePowerfromMessina to
Maastricht. Ithaca,N.Y: CornellUniversity Press.
Nogues,JulioJ.,andRosalindaQuintanilla. 1993.LatinAmerica'sIntegration andtheMultilateral Trading
System.In NewDimensionsinRegionalIntegration, editedbyJaimede Melo andArvindPanagariya,
Nye,JosephS., Jr.1971. Peace in Parts: Integration and Conflictin RegionalOrganization. Boston:
Little,Brown.
. 1988.NeorealismandNeoliberalism. WorldPolitics40 (2): 235-51.
Olson,Mancur.1993.Discussion.In NewDimensionsinRegionalIntegration, editedbyJaimede Melo
andArvindPanagariya, 122-27.NewYork:Cambridge University Press.

626 International
Organization
Oneal,JohnR., andBruceM. Russett.1997.The ClassicalLiberalsWereRight:Democracy, Interdepen-

dence,andConflict, 1950-1985.International StudiesQuarterly 41 (2):267-94.
Oye,Kenneth A. 1992.EconomicDiscrimination andPoliticalExchange:WorldPoliticalEconomyinthe
1930sand 1980s.Princeton, N.J.:Princeton University Press.
Padoan,PierCarlo.1997.RegionalAgreements as Clubs:The EuropeanCase. In ThePoliticalEconomy
ofRegionalism, editedby EdwardD. Mansfieldand HelenV. Milner,107-33.New York:Columbia
University Press.
Perroni,Carlo,andJohnWhalley.1996.How SevereIs GlobalRetaliation RiskUnderIncreasing Region-
alism?American EconomicReview(PapersandProceedings)86 (2):57-61.
Petri,PeterA. 1993.The East AsianTradingBloc: An AnalyticalHistory. In Regionalismand Rivalry:
Japanand theUnitedStatesin PacificAsia, editedby Jeffrey A. Frankeland Miles Kahler,21-48.
Chicago:University ofChicagoPress.
Pollard,Sidney.1974.EuropeanEconomicIntegration 1815-1970.London:ThamesandHudson.
Pomfret, RichardW. T. 1988. Unequal Trade: The Econiomics of Discriminatory InternationalTrade
Policies.Oxford:Basil Blackwell.
Remmer, KarenL. 1998.Does DemocracyPromoteInterstate Cooperation? LessonsfromtheMercosur
Region.International StudiesQuarterly 42 (1):25-52.
Russett,BruceM. 1967.International RegionsandtheInternational System: A StudyinPoliticalEcology.
Chicago:Rand-McNally.
Sandholtz, Wayne,and JohnZysman.1989. 1992: RecastingtheEuropeanBargain.WorldPolitics42
(1):95-128.
Saxonhouse,GaryR. 1993.PricingStrategies andTradingBlocs in East Asia. In RegionalismanidRi-
valry:Japanland theUnitedStatesin PacificAsia, editedby Jeffrey A. Frankeland Miles Kahler,
89-119.Chicago:University ofChicagoPress.
Serra,Jaime,Guillermo Aguilar,JoseC6rdoba,GeneGrossman, CarlaHills,JohnJackson, JuliusKatz,
PedroNoyola,andMichaelWilson.1997.Reflections on Regionalism: ReportoftheStudyGioupon
International Trade.Washington, D.C.: Brookings Institution.
Snidal,Duncan.1985.TheLimitsofHegemonicStability Theory. International Organization39 (4):579-
614.
Srinivasan, T. N. 1993.Discussion.In NewDimensionsinRegionalIntegration, editedbyJaimede Melo
andArvindPanagariya, 84-89. NewYork:Cambridge University Press.
Summers, LawrenceH. 1991.Regionalism andtheWorldTradingSystem.InPolicyImplications ofTrade
and Currency Zones:A Symposium, sponsored bytheFederalReserveBankofKansasCity,295-301.
KansasCity,Mo.: FederalReserveBank.
Thompson, WilliamR. 1973.TheRegionalSubsystem: A Conceptual Explication andPropositionalInven-
tory.International StudiesQuarterly 17 (1):89-117.
Tinbergen, Jan.1962. ShapingtheWorldEconomy:Suggestions foran Internlational EconomicPolicy.
NewYork:TheTwentieth Century Fund.
Tornell,Aaron,andGerardoEsquivel.1997.The PoliticalEconomyofMexico's EntryintoNAFTA.In
RegionalismVersusMultilateral TradeArrangements, editedbyTakatoshiIto andAnne0. Krueger,
25-56. Chicago:University ofChicagoPress.
Viner,Jacob.1950.TheCustomsUnionIssue.NewYork:CarnegieEndowment forInternational
Peace.
Whalley,John.1998.WhyDo Countries Seek RegionalTradeAgreements? In TheRegionalization ofthe
WorldEconony,editedbyJeffrey A. Frankel,63-83. Chicago:University ofChicagoPress.
Winters, L. Alan.1993.TheEuropeanCommunity: A Case ofSuccessfulIntegration? In NewDimensions
in RegionalIntegration, editedby Jaimede Melo andArvindPanagariya, 202-28. New York:Cam-
bridgeUniversity Press.
Winters,L. Alan,andZhenKunWang.1994.EasternEuropes International Trade.Manchester, England:
Manchester University Press.
Wonnacott, Paul. 1996.BeyondNAFTA:The Designofa FreeTradeAgreement oftheAmericas.In The
Economicsof Preferential TradeAgreements, editedby JagdishBhagwatiand ArvindPanagariya,
79-107.Washington, D.C.: AEI Press.

Wonnacott,Paul, andMarkLutz. 1989. Is Therea Case forFreeTradeAreas?In Free TradeAreasantd

U.S. TradePolicy,editedby Jeffrey J. Schott,59-84. Washington,
D.C.: InstituteforIntemational
Economics.
WorldTradeOrganization. 1995.RegionalisiiandtheWorldTradingSystem. Geneva:WorldTradeOrga-
nization.
. 1996.AnnualReport1996: Tradeand ForeignDirectInvestment. Vol. 1. Geneva:WorldTrade
Organization.
Yarbrough,BethV.,andRobertM. Yarbrough. 1992.Cooperationand Governance Trade:
inInternational
Approach.Princeton,
TheStrategicOrganiizational N.J.:Princeton
UniversityPress.
in Intemational
. 1997. DisputeSettlement Trade:Regionalismand ProceduralCoordination.In
ThePoliticalEconomyofRegionalism, editedbyEdwardD. MansfieldandHelenV. Milner,134-63.
NewYork:ColumbiaUniversity Press.


Mansfried and Milner (1999)

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Mansfried and Milner (1999)

Uploaded by

Copyright:

Available Formats

The New Wave of Regionalism

Author(s): Edward D. Mansfield and Helen V. Milner

This content downloaded from 148.61.13.133 on Sun, 29 Sep 2013 21:54:34 PM

Economicregionalism appearsto be growingrapidly.Whythishas occurredand

Forhelpfulcomments on earlierdrafts to David Baldwin,PeterGoure-

This content downloaded from 148.61.13.133 on Sun, 29 Sep 2013 21:54:34 PM

Extensivescholarlyinterestin regionalismhas yetto generatea widelyaccepted

2. Bhagwatidistinguishes two waves of regionalism

This content downloaded from 148.61.13.133 on Sun, 29 Sep 2013 21:54:34 PM

remainscontroversial. Some observers, forexample,considerAsia-Pacifica single

5. See, forexample,Deutschetal. 1957;Nye 1971;Russett1967;andThompson1973.

This content downloaded from 148.61.13.133 on Sun, 29 Sep 2013 21:54:34 PM

EuropeanCommunity [EC]/European Union[EU],theEuropeanFreeTradeAssocia-

Since muchof thecontemporary literatureon regionalismfocuseson PTAs,we

Muchoftheliterature on regionalism focuseson thewelfareimplications ofPTAs,

11. See, forexample,Bhagwati1993; Bhagwatiand Panagariya1996,4-5; de Melo and Panagariya

This content downloaded from 148.61.13.133 on Sun, 29 Sep 2013 21:54:34 PM

15. Viner1950,43. Forcomprehensive overviewsoftheissuesaddressedin thissection,see Baldwin

This content downloaded from 148.61.13.133 on Sun, 29 Sep 2013 21:54:34 PM

Consistent withthisproposition, a seriesof simulationsby Jeffrey A. Frankel,

20. Frankel, Stein,andWei 1995.

This content downloaded from 148.61.13.133 on Sun, 29 Sep 2013 21:54:34 PM

Considerable has beenexpressedin howthepreferential

31. See, forexample,Lawrence1996;andSummers1991.

This content downloaded from 148.61.13.133 on Sun, 29 Sep 2013 21:54:34 PM

beginbydescribing eachofthefourwavesofregionalism thathavearisenoverthe

37. See, forexample,Kindleberger 1975; and Pollard1974.However,regionalism was notconfined

This content downloaded from 148.61.13.133 on Sun, 29 Sep 2013 21:54:34 PM

WorldWarsI andII tendedtobe highlypreferential. Some werecreatedto consoli-

This content downloaded from 148.61.13.133 on Sun, 29 Sep 2013 21:54:34 PM

50. Thesedefineregionalismin somewhat different

This content downloaded from 148.61.13.133 on Sun, 29 Sep 2013 21:54:34 PM

TABLE 1. Intraregionaltradeflows duringthepost-WorldWarII era

EastAsia 0.199 0.198 0.213 0.229 0.256 0.293

WesternEurope 0.430 0.530 0.630 0.660 0.720

EuropeanCommunity 0.345 0.510 0.500 0.540 0.545 0.604

Source:Data inpartA aretakenfromFrankel,Stein,andWei 1995;partB, fromAndersonand

This content downloaded from 148.61.13.133 on Sun, 29 Sep 2013 21:54:34 PM

withinAsia concurrent withrobustgrowthin NorthAmericaand WesternEurope

This content downloaded from 148.61.13.133 on Sun, 29 Sep 2013 21:54:34 PM

1948-54 1955-59 1960-64 1965-69 1970-74 1975-79 1980-84 1985-89 1990-94

The mostrecentwaveofregionalism has arisenin a different

This content downloaded from 148.61.13.133 on Sun, 29 Sep 2013 21:54:34 PM

Although itis frequently

65. See, forexample,Deutschetal. 1957;Haas 1958;andNye 1971.

This content downloaded from 148.61.13.133 on Sun, 29 Sep 2013 21:54:34 PM

possibleto excludethemfromthearrangement, a tack,forexample,thatled to "the

This content downloaded from 148.61.13.133 on Sun, 29 Sep 2013 21:54:34 PM

supportfreetrade,thevalueoffurther multilateraltradeliberalization is diminished

75. Krueger1997,19 fn.27.

This content downloaded from 148.61.13.133 on Sun, 29 Sep 2013 21:54:34 PM

However,PTAs also havebeencreatedbypolicymakers whopreferred toliberal-

79. Eichengreen andFrankel1995,101.

This content downloaded from 148.61.13.133 on Sun, 29 Sep 2013 21:54:34 PM

policiesandthepoliticalinstitutions ofprospective members bydemanding thatthey

This content downloaded from 148.61.13.133 on Sun, 29 Sep 2013 21:54:34 PM

societalorinstitutional factors,moreattention needstobe centered on howtheinter-

88. Forone studyofthissort,see de Melo,Panagariya,

This content downloaded from 148.61.13.133 on Sun, 29 Sep 2013 21:54:34 PM

inthesestatesmaybearheavilyon whether theyforma PTA.92The extantliterature,

The decisionto forma PTA restspartlyon thepreferences and politicalpowerof

This content downloaded from 148.61.13.133 on Sun, 29 Sep 2013 21:54:34 PM

Some observers arguethatas a hegemon'spowerrecedes,ithas reasontobehave

This content downloaded from 148.61.13.133 on Sun, 29 Sep 2013 21:54:34 PM