Introduction: On Shifting Ground — the Crossroads of Regional and Sectoral Associations

Trade generates mutual gains. The distribution of these gains both among and within countries remain matters of serious contention. The Stolper- Samuelson theorem argues that trade liberalization can make some members of a country even worse off; in other words, not only are the gains from trade unequally spread within a country, but losses can also ensue for some groups. Welfare economics also shows that unless those benefiting from a certain policy actually compensate those made worse off by it, that policy cannot be claimed as desirable. Even modern academic orthodoxy has opened the way to systematic exploration of links between trade and income distribution, turning away from the somewhat dogmatic view that dismisses the possibility that anybody may be hurt by liberalization. Simple assertions such as ‘trade benefits everybody’ or ‘trade hurts everybody’ reflect neither our knowledge nor reality. It all depends on the conditions of competition in which trade takes place. The sensitivity to the painful adjustment process is contained in what is known as the compromise of ‘embedded liberalism’ (Ruggie, 1982): the pursuit of an international division of labor compatible with the requirements of domestic stability. International rules encourage free trade but not at all costs; instead there is pari passu a commitment to minimize socially disruptive domestic adjustment costs as well as other economic and political vulnerabilities.