Price data on exports to Brazil from countries excluded from MERCOSUR show that preferential trading agreements hurt nonmember countries by compelling them to reduce their prices to meet competition from suppliers within the regional trading bloc.

Covers trends from 1957 to 1995.

Global commerce is rapidly organizing around regional trading blocs in North America, Western Europe, Pacific Asia, and elsewhere--with potentially dangerous consequences for the world trading system. Professor Kerry Chase examines how domestic politics has driven the emergence of these trading blocs, arguing that businesses today are more favorably inclined to global trade liberalization than in the past because recent regional trading arrangements have created opportunities to restructure manufacturing more efficiently. Trading Blocs is the first book to systematically demonstrate the theoretical significance of economies of scale in domestic pressure for trading blocs, and thereby build on a growing research agenda in areas of political economy and domestic politics. "Chase has written a superb book that provides us with an innovative and compelling explanation for the development of trading blocs." --Vinod Aggarwal, Director, Berkeley APEC Study Center, University of California, Berkeley Kerry A. Chase is Assistant Professor of Political Science at Tufts University.

Price data on exports to Brazil from countries excluded from MERCOSUR show that preferential trading agreements hurt nonmember countries by compelling them to reduce their prices to meet competition from suppliers within the regional trading bloc.The welfare effects of preferential trading agreements are most directly linked to changes in trade prices - that is, the terms of trade.Chang and Winters use a simple strategic pricing game in segmented markets to measure the effects of MERCOSUR on the pricing of nonmember exports to the regional trading bloc. Working with detailed data on unit values and tariffs, they find that the creation of MERCOSUR is associated with significant declines in the prices of nonmembers' exports to the bloc. These can be explained largely by tariff preferences offered to a country`s partners.Focusing on the Brazilian market (by far the largest in MERCOSUR), they show that nonmembers' export prices to Brazil respond to both most-favorable-nation and preferential tariffs. Preferential tariffs induce reductions in nonmember export prices.This paper - a product of Trade, Development Research Group - is part of a larger effort in the group to understand the effects of regional integration. The authors may be contacted at [email protected] or l.a.winters @sussex.ac.uk.

This text examines regionalism from the perspective of developing countries. It presents a comprehensive account of existing theory and empirical results and incorporates the findings of formal analyses ofthe politics and dynamics of regionalism.

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.

International trade is the core foundation of globalisation. This current and up-to-date volume brings together the finest academics working in the field today, containing contributions in key areas of policy research, such as, modelling frameworks, trade policy, trade and migration, trade and the environment, trade and unemployment.