Is Regionalism an Increasing Feature of the World Economy?

Abstract

Measuring the importance of regionalism in international trade is desirable but difficult. The number of regional trade agreements (RTAs) reported to the WTO or the proportion of world trade which is between countries in a RTA are frequently cited as evidence that regionalism is growing at an accelerating rate. This paper questions whether RTAs really are as important as the headline numbers suggest, or whether they just occupy an excessively large part of policymakers' and economic journalists' time. The main contributions are to analyse the number of RTAs and the share of world trade criteria in order to show why both are meaningless measures of the extent of regionalism in the current world economy. The impact of RTAs on world trade is difficult to assess because some of the most important RTAs go beyond trade to deep integration measures, while a large number of RTAs are either not implemented or have very limited coverage. The tendency towards extreme outcomes (ie. economic union or negligible economic effects) explains why, despite the apparent proliferation of RTAs, regionalism has not posed a serious challenge to the world economy as the multilateral trading system has over the last sixty years gone from strength to strength.