Trends and Issues in Global
and Regional Integration
A few trends
Rise of world trade: Merchandise
Rising Merchandise Exports
Rise of World Trade: North and
South
The Asian Century?
 “
Source: Baldwin 2006
More than Asia: Emergence of BRICs…
IMF, World Economic Outlook 2007
Emergence of BRICs…
IMF, World Economic Outlook 2007
Rising China: Market shares trends
in world trade (%)
20
18
16
EU25
14
USA
12
Japan
10
8
China
6
4
2
0
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Source: Eurostat, IMF, all products in value, excluding intra-EU trade
Shares of global trade, by regions
Intra vs extra-regional trade
Growth of developing countries trade
How impressive is the South-South growth?
Exporters from the South are capturing the Southern markets that used
to be served by exporters from the North.
The rise of financial flows
• Issue 3: Is Regionalism a solution?
Types of «regional» economic arrangement:is
there a logic of integration?
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?
Bilateral Agreements
Free Trade Area
Customs Union
Common Market
Economic and Monetary Union (e.g. EU)
Trade liberalization strategies (Ravenhill 2005)
Waves of regionalism after WWII
The number of PTAs exploded since the
1990s
Cumulative number of agreements
(EU-15 counted as single country
30
300
Cumulative number of
agreements (EU- 25 counted as
single country
25
20
200
Agreements not
notified to the WTO
15
10
250
150
Agreements notified
to the WTO
100
5
50
0
0
1958
1969
1976
1984
1989
1994
1999
2004
Source: World Bank Global Economic Prospects (GEP) 2005
The new wave?
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•
•
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Changed context
End of the Cold War
Global interdependence
Neo-liberal ideas in OECD countries (and GEMs)
– Signaling openness, market access
– Frustration with WTO/GATT
– Change of US, Japanese and EU attitudes
Current patterns and trends on
regionalism/bilateralism
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Many South-South agreements
Beyond the region (the R is losing significance!)
Shallow and deep integration
WTO+ in North-South
Open regionalism and strategic forum-shopping?
RTAs go far beyond trade
Standards
Transport
Customs
cooperation
Services
Intellectual
Property
Investment
Dispute
Settlement
Labor
Competition
US-Jordan
No
No
Yes
Yes
Yes
Yes
Yes
Yes
No
US-Chile
Yes
No
Yes
Yes
Yes
Yes
Yes
Yes
Yes
US-Singapore
Yes
No
Yes
Yes
Yes
Yes
Yes
Yes
Yes
US-Australia
Yes
No
Yes
Yes
Yes
Yes
Yes
Yes
Yes
US-CAFTA
Yes
No
Yes
Yes
Yes
Yes
Yes
Yes
No
US-Morocco
Yes
No
Yes
Yes
Yes
Yes
Yes
Yes
No
NAFTA
Yes
No
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
U.S.-Led
E.U.-Led
EU-South Africa
EU-Mexico
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
Yes
EU-Chile
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
Yes
MERCOSUR
No
No
Yes
Yes
No
Yes
Yes
No
Yes
Andean Community
No
No
Yes
Yes
No
Yes
Yes
No
Yes
CARICOM
Yes
Yes
Yes
Yes
No
Yes
Yes
Yes
Yes
AFTA
Yes
Yes
Yes
Yes
No
Yes
No
No
No
South-South
SADC
Yes
Yes
Yes
No
Yes
Yes
Yes
Yes
Yes
No
Yes
Yes
Yes
Yes
Japan-Singapore
Yes
No
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Canada-Chile
No
No
Yes
Yes
No
Yes
Yes
Yes
Yes
Chile-Mexico
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
COMESA
Other
Source: GEP 2005
South-South RTAs predominate in number,
but not in trade covered
Number of RTAs
Percent of World Trade Covered
35
250
30
200
25
SouthSouth
150
SouthSouth
20
15
100
US
US
10
50
5
European
Union
0
1990
1996
European
Union
0
2002
1990
1996
2002
Source: GEP 2005
Cross-regional RTAs
Source: WTO, Crawford and Fiorentino, 2005
The Political-Economy of Regionalism:
Economic Debates
• Trade Diversion vs. Trade Creation
• Stumbling Bloc vs. Stepping Stone
• New rent-seeking (e.g. preference erosion)
• Domino Theory (Baldwin) / Export Discrimination
(Dür)
Potential Effects
Economic consequences
 More trade among members, but limited
 So far small drivers for trade reforms
 Not significant trade diversion (depends on tariff levels)
 Increased FDI
 Little overall effect on economic welfare (Ravenhill 2007, GEP 2005)
But, Spaghetti-Bowl „transaction“ costs:
 Rules of Origin
 Political exemptions: labor mobility, specific sector protection (e.g.
agriculture, services)
 Not well defined dispute resolution mechanisms
 Not much pressure to negotiate multilaterally
…regional agreements are a relatively small
driver of trade reform
Decomposing tariff reductions in response to multilateral, regional and own initiatives
Av. Tariffs, 1983 and 2003
30
Decomposing 20% pt. decline
Regional
Agreements
10%
29.9
25
20
Multilateral
Agreements
25%
15
9.3
10
Autonomous
Liberalization
65%
5
0
1983
Source: Martin and Ng, 2004
2003
Source: GEP 2005
Agreements with high external tariffs risk
trade diversion
NAFTA
AFTA
SADC
EAC
MERCOSUR
COMESA
ECOWAS
SAPTA
0
5
10
15
20
25
Average weighted tariffs
Note: Tariffs are import-weighted at the country level to arrive at PTA averages
Source: UN TRAINS, accessed through WITS
Source: GEP 2005
Varieties of Regionalism: Europe
Source: WTO, Crawford and Fiorentino, 2005
Americas
Source: WTO, Crawford and Fiorentino, 2005
Asia-Pacific
Source: WTO, Crawford and Fiorentino, 2005
• Issue 4: Financial and Economic Crises
and now what?
Contangion Effect
G20 country responses
G20 country responses
Economic Outlook
Questions abound
 The future role of international cooperation:
 The emergence of the G20
 The role of the IMF
 How to tackle protectionism
 How to address national and global imbalances
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Currency alignments
Balance of payments deficits
Budget deficits
State policies, foreign aid and development