In this paper, we present a model where trade is motivated both by preference for variety and comparative advantages. We use this framework to analyze the welfare implications of trading blocs among countries with different endowments with and without transportation costs. In this framework, we address the following issues: a) the welfare implications of the consolidation of the world into a few trading blocs; b) the different incentives that rich and poor countries have in choosing their partners in trade arrangements; c) whether the welfare consequences of continental preferential trade arrangements depend on the relative endowments.

Regional economic arrangements such as free trade areas (FTAs), customs unions, and currency blocs, have become increasingly prevalent in the world economy. Both pervasive and controversial, regionalization has some economists optimistic about the opportunities it creates and others fearful that it may corrupt fragile efforts to encourage global free trade. Including both empirical and theoretical studies, this volume addresses several important questions: Why do countries adopt FTAs and other regional trading arrangements? To what extent have existing regional arrangements actually affected patterns of trade? What are the welfare effects of such arrangements? Several chapters explore the economic effects of regional arrangements on patterns of trade, either on price differentials or via the gravity model on bilateral trade flows. In addition, this book examines the theoretical foundation of the gravity model. Making extensive use of the gravity model of bilateral trade, several chapters explore the economic effects of regional arrangements. In addition, this book examines the theoretical foundation of the gravity model.

The Oxford Handbook on the World Trade Organization provides an authoritative and cutting-edge account of the World Trade Organization. Its purpose is to provide a holistic understanding of what the WTO does, how it goes about fulfilling its tasks, its achievements and problems, and how it might contend with some critical challenges. The Handbook benefits from an interdisciplinary approach. The editorial team comprises a transatlantic partnership between a political scientist, a historian, and an economist. The distinguished and international team of contributors to the volume includes leading political scientists, historians, economists, lawyers, and practitioners working in the area of multilateral trade. All the chapters present original and state-of-the-art research material. They critically engage with existing academic and policy debates, and also contribute to the evolution of the field by setting the agenda for current and future WTO studies.The Handbook is aimed at research institutions, university academics, post-graduate students, and final-year undergraduates working in the areas of international organization, trade policy and negotiations, global economic governance, and economic diplomacy. As such, it should find an enthusiastic readership amongst students and scholars in History, Economics, Political Science, International Relations, Public Policy, and Law. Equally important, the book should have direct relevance for diplomats, international bureaucrats, government officials, and other policy-makers and practitioners in the area of trade and economic governance.

This book describes the rules governing regional trade agreements, providing new insights into the interplay between regional and multilateral trade rules.

The signing of the North American Free Trade Agreement (NAFTA) and recent expansions of the European Union have led to renewed efforts to create preferential trade areas (PTAs) around the world including Asia, Africa and Latin America. Because PTAs liberalize trade with union members but not the rest of the world, they are not necessarily a healthy development. By dividing the world into trade blocs, they also threaten to undermine the multilateral trading system.This collection of recently published essays by a leading critic of regionalism offers an assessment of the economic impact of PTAs on member countries and the world. The first set of essays present a theoretical analysis of the issues using simple economic models, and study the relationship between regionalism and multilateralism. Subsequent essays evaluate the role of PTAs in Asia, North America and Latin America. The general theme of the book is that, on balance, trade liberalization through PTAs is a mistake. Trade diversion, and the creation of complicated and discriminatory tariff regimes with increased tariffs for non-member countries — the consequences of PTAs — are likely to undermine the multilateral trading system.The book will be useful to academics as well as policy makers and policy analysts. Many of the essays have been featured in newspapers and journals such as the Financial Times, Economist, Journal of Commerce and International Herald Tribune. Some of these essays are already on many reading lists in the United States.

Global value chains (GVCs) powered the surge of international trade after 1990 and now account for almost half of all trade. This shift enabled an unprecedented economic convergence: poor countries grew rapidly and began to catch up with richer countries. Since the 2008 global financial crisis, however, the growth of trade has been sluggish and the expansion of GVCs has stalled. Meanwhile, serious threats have emerged to the model of trade-led growth. New technologies could draw production closer to the consumer and reduce the demand for labor. And trade conflicts among large countries could lead to a retrenchment or a segmentation of GVCs. World Development Report 2020: Trading for Development in the Age of Global Value Chains examines whether there is still a path to development through GVCs and trade. It concludes that technological change is, at this stage, more a boon than a curse. GVCs can continue to boost growth, create better jobs, and reduce poverty provided that developing countries implement deeper reforms to promote GVC participation; industrial countries pursue open, predictable policies; and all countries revive multilateral cooperation.

November 1996 Do the forces that regional integration arrangements set up encourage or discourage a trend toward globally freer trade? We don't know yet. The literature on regionalism versus multilateralism is growing as economists and political scientists grapple with the question of whether regional integration arrangements are good or bad for the multilateral system. Are regional integration arrangements building blocks or stumbling blocks, in Jagdish Bhagwati's phrase, or stepping stones toward multilateralism? As economists worry about the ability of the World Trade Organization to maintain the GATT's unsteady yet distinct momentum toward liberalism, and as they contemplate the emergence of world-scale regional integration arrangements (the EU, NAFTA, FTAA, APEC, and, possibly, TAFTA), the question has never been more pressing. Winters switches the focus from the immediate consequences of regionalism for the economic welfare of the integrating partners to the question of whether it sets up forces that encourage or discourage evolution toward globally freer trade. The answer is, We don't know yet. One can build models that suggest either conclusion, but these models are still so abstract that they should be viewed as parables rather than sources of testable predictions. Winters offers conclusions about research strategy as well as about the world we live in. Among the conclusions he reaches: * Since we value multilateralism, we had better work out what it means and, if it means different things to different people, make sure to identify the sense in which we are using the term. * Sector-specific lobbies are a danger if regionalism is permitted because they tend to stop blocs from moving all the way to global free trade. In the presence of lobbies, trade diversion is good politics even if it is bad economics. * Regionalism's direct effect on multilateralism is important, but possibly more so is the indirect effect it has by changing the ways in which groups of countries interact and respond to shocks in the world economy. * Regionalism, by allowing stronger internalization of the gains from trade liberalization, seems likely to facilitate freer trade when it is initially highly restricted. * The possibility of regionalism probably increases the risks of catastrophe in the trading system. The insurance incentives for joining regional arrangements and the existence of shiftable externalities both lead to such a conclusion. So too does the view that regionalism is a means to bring trade partners to the multilateral negotiating table because it is essentially coercive. Using regionalism for this purpose may have been an effective strategy, but it is also risky. This paper - a product of the International Trade Division, International Economics Department - was prepared for a conference on regional integration sponsored by the Centre for Economic Policy Research, La Coru-a, Spain, April 26-27, 1996, and will appear in the conference proceedings.

Covers trends from 1957 to 1995.