Skip to main content
Article thumbnail
Location of Repository

Returns to regionalism : an evaluation of nontraditional gains from regional trade agreements

By Raquel Fernandez


The past decade has witnessed an explosion in the number of regional trade agreements. There seems to be a general, if ill-defined, belief on the part of many policymakers and academics that there is more to such agreements than the traditional gains from trade (thus the term"new regionalism"). The author examines several possible benefits that regional trade agreements may confer on their partners, including credibility, signaling, bargaining power, insurance, and a mechanism for coordination. She assesses the condtions necessary for each of these benefits, gives stylized examples of policies that might bring about those conditions, and discusses the plausibility of those conditions existing. In this light, she examines the North American Free Trade Agreement (NAFTA) and the European association agreements between the European Union and the countries in Central and Eastern Europe. She concludes that regional trade agreements can serve a useful economic purpose beyond the direct gains from tradeliberalization, by reducing uncertainties and improving credibility, and thus making it easier for the private sector to plan and invest. Indeed, reducing uncertainty may be essential for realizing gains from liberalization. Whether economies benefit from a particular regional trade agreements depends on the scope and coverage of its provisions, the nature of the enforcement mechanism, the circumstances in which the agreement can be amended, and changes in the behavioral incentives for various agents in the economy that result from it. It is important to examine these factors carefully and to evaluate the feasibility of freer trade in their absence when determining the effects of regional trade agreements on world welfare.Environmental Economics&Policies,Economic Theory&Research,Payment Systems&Infrastructure,Rules of Origin,Labor Policies,Environmental Economics&Policies,Economic Theory&Research,Rules of Origin,TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT,Trade and Regional Integration

OAI identifier:

Suggested articles


  1. (1987). Discretionary Trade Policy and Excessive Protection,"
  2. (1992). Free Trade Agreements and the Credibility of Trade Reforms," Economic Review, Federal Reserve Bank of Dallas,
  3. (1991). Innovation and Growth in the World Economy,
  4. (1996). Integration and Non-Member Welfare: Measuring the Price Effects," mimeo.
  5. (1995). International Rules and Institutions for Cooperative Trade Policy,"
  6. (1991). International Trade with Endogenous Technological Change,"
  7. (1983). Lectures on Interngional Trade,
  8. (1996). Multilateral Roads to Regionalism," Mimeograph,
  9. (1992). National Commission on Employment Policy
  10. (1993). New Dimensions in Regional Integration, Cambridge, Great Britain:
  11. (1996). Preferential Trading Areas and MultilateralismStrangers, Friends, or Foes?" in The Economics of Preferential Trade Agreements,
  12. (1993). Regional Integration Agreements and Foreign Direct Investment,"
  13. (1993). Regional Integration Agreements and Macroeconomic Discipline,"
  14. (1993). Regional Integration and the Global Training System
  15. (1996). Regional Integration as Trade Diplomacy," World Bank mimeo.
  16. (1996). Regionalism and Multilateral Tariff Cooperation,"
  17. (1993). Regionalism and Multilateralism: An Overview,"
  18. (1995). Regionalism and the World Trading System.Chart 1: Number of regional integration agreements notified to GATT,
  19. (1996). Regionalism in a Multilateral World," Mimeograph,
  20. (1996). Regionalism versus Multilateralism,"
  21. (1991). Resistance to Reform: Status Quo Bias in the Presence of Individual-Specific Uncertainty,"
  22. (1977). Rules Rather Than Discretion: The Inconsistency of Optimal Plans,"
  23. (1964). Tariff Preferences and the Terms of Trade,"
  24. (1996). The 'New Regionalism' as Insurance," Mimeograph,
  25. (1950). The Customs Union Issue,
  26. (1993). The European Community: A Case of Successful Integration?,"
  27. (1996). The Free Trade of the Americas: Good for Latin America?",
  28. (1994). The new Regionalism: Trade Liberalization or Insurance?,"
  29. (1992). The North American Free Trade Agreement: Issues and Policies. Brookings Institution.
  30. (1991). The Trading Potential of Eastern Europe,"
  31. (1996). The Value of Trade Agreements in the Presence of Political Pressures,"
  32. (1991). The World Trading System at Risk,
  33. (1992). Towards the Establishment of a Continental European Customs Union,"
  34. (1993). Trade Relations Between the European Community and the Countries of Eastern and Central Europe," Mimeograph, World Bank.
  35. (1996). Why Do Countries Seek Regional Trade Agreements?,"

To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.