ECONOMIC ASPECTS OF REGIONAL INTEGRATION

The academic literature on regionalism covers the contributions of economics, international relations and international political economy. Typical questions asked by these disciplines in the regionalism literature are summarized in Table 3. There is not space in this paper to pursue all of these questions. We focus on the contributions of economists who investigate the potential and actual economic impacts of forming regions. Economists’ analysis of regions begins with the classic theory of customs unions formulated by Viner, Meade and others and has been developed more recently in the context of imperfect competition (see Baldwin, 1997 for an accessible overview on which we draw in this section, as well as the recent volume by Schiff and Winters (2003) which summarizes the results of World Bank research on regional integration and development). This traditional theory is contrasted with the ‘developmental regionalism’ espoused by some theorists concerned with developing countries and still dominant among those concerned with African regionalism. With the trend towards deeper integration, we summarize the emerging literature on the gains from integrating services trade and from regulatory integration. The lessons for developing countries from the literature surveyed are summarized in conclusion.
Table 3 - Debates about regionalism Motivation -why do regions come into being?Structure - what form do regions take, and why do they take these forms?Design - how should regions be designed to ensure they function efficiently?Impacts - are regions successful in promoting more rapid economic growth for members, and what are the consequences of third parties?Convergence - do regions assist in the convergence of economic performance and living standards between participating countries?Sustainability - what contributes to the