The return to convertibility and regional economic integration in western Europe The vanishing of the world dollar gap and the large surpluses currently accumulated by Western Europe constitute a most favourable environment for a return to currency convertibility. The weak spot remains , however, the United Kingdom. Although that country seems now to have abandoned the policy of a unilateral return to convertibility for the pound, it has not clearly defined its attitude towards a regional approach to convertibility. The maintenance of international convertibility, once restored, will depend primarily on the national policies to be followed in the future by the major trading countries. Its successful operation, however, will require in addition some further strengthening and improvements of the regional and international institutions and agreements governing trade and payments relations among independent countries in an interdependent world. Despite the importance of the United States in world production and trade, the main threat to the maintenance of convertibility by the European countries lies in their own policies rather than those of the United States. Balance of payments pressures are overwhelmingly dominated in Western Europe by mutual trade between countries in that area rather than by fluctuations in their exports to the United States or to the other non-EPU countries. There can be no doubt as to the role played by the OEEC-EPU system in the progress of Western Europe towards convertibility and trade liberalization. The choice is now between its integration within the framework of a modernized definition of convertibility or its abandonment as an essential step towards the restoration of worldwide convertibility. In this respect the European Monetary agreement has succeeded in reconciling these two divergent views although the agreement marks, in some respects, a retrogression with respect to the EPU system. These shortcomings illustrate the limitations placed upon OEEC by British reluctance to associate the United Kingdom too closely with Europe. But closer association with Europe by the United Kingdom and other Commonwealth countries may