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Open Regionalism in a World of Continental Trade Blocs By Shang-Jin Wei and Jeffrey A. Frankel Full Text of This Article (PDF 55 K)
Abstract: Continental trade blocs are emerging in many parts of the world almost in tandem. If trade blocs are required to satisfy the McMillan criterion of not lowering their trade volume with outside countries, they have to engage in a dramatic reduction of trade barriers against nonmember countries. That may not be politically feasible. On the other hand, in a world of simultaneous trade blocs, an open regionalism in which trade blocs undertake relatively modest external liberalization can usually produce Pareto improvement. [JEL F15]
© 1998 International Monetary Fund
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