Economic Principles of Regional Integration

The surge in the number of RTA in the last decades has been impressive. Counting the number of RTA is far from being a perfect indicator of the extension and depth of regionalism (Pomfret 2006), but numbers must be quoted: 380 RTA have been notified to the GATT/WTO, most of them creation of WTO, Mongolia being the only WTO member which is not a member in any regional trade agreement; 400 agreements are scheduled to be implemented by 2010. Only 10% of these are cus-toms unions (CU), the remaining 90% free trade (FTA) or partial scope agreements. Agreements involving countries with strong differences in per-capita income grew from 14% of total RTA in 1995 to 27% in 2007 (Unctad 2007). Non neighbouring Preferential Trade Agreement are also reported; they tend to be bilateral agreements with a strong foreign policy flavour. Proliferation of preferential agreements may descend from frustration with the WTO multilateral approach, perceived as too slow and complex; may reflect the de-sire to broaden and deepen existing regional integration; to offer economic advan-tages to political allies; to support development efforts. RTA may also be seen as a way to signal overall adoption of policy reforms, to build institutional capabilities, especially in the case of north-south and south-south regional integration involving low-income countries. Political motivations and economic influences play an important role in regional integration policies, as well as in unilateral preferences and multilateral agreements. All trade policy decisions reflect the complex interplay between policy makers and economic actors. Highlighting the impact of trade and trade policies on different ac-tors (par. 1-5) introduces to the “political economy” approach to trade policy (6-7) and the economics of regional integration (8-11).