Regional liberalization sweeps the globe like wildfire while multilateral trade talks proceed at a glacial pace. Why are countries eager to liberalize regionally but reluctant to do so multilaterally? The answer of the GATT-is-dead school is that multilateralism is too cumbersome for contemporary trade issues. This paper proposes a very different answer. Recent regionalism is caused by two idiosyncratic events multiplied by a domino effect. The triggering events <196> the US-Mexico FTA and the European Community's 1992 programme <196> had nothing to do with GATT's health. The domino effect is simple. Political equilibria, which balance anti- and pro-membership forces, determine governments' stances on regional liberalization. Domestic exporters to regional blocs are a powerful pro-membership constituency. An event that triggers closer integration within an existing bloc reduces the profits of non-member exporters, inducing them to boost their pro-membership political activity. The extra activity alters the political equilibrium, leading some countries to join. This enlargement further harms non-member exporters since they now face a disadvantage in a greater number of markets. This second-round effect brings forth more pro-membership political activity and a further enlargement of the bloc. The new political equilibrium is marked by larger regional trading blocs. In the meantime regionalism appears to spread like wildfire.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Publisher Info
Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number
857.
Find related papers by JEL classification: F01 - International Economics - - General - - - Global Outlook F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations F15 - International Economics - - Trade - - - Economic Integration
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Gene M. Grossman & Elhanan Helpman, 1992.
"Protection For Sale,"
NBER Working Papers
4149, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted)
Grossman, G.M. & Helpman, E., 1992.
"Protection for Sale,"
Papers
162, Princeton, Woodrow Wilson School - Public and International Affairs.
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.) This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.