Regionalism: Disguises Protectionism or an Alternative Path to Global Trade Liberalization

Abstract:

The emergence of three major powerful and growing regional blocs; the European Union (EU), the North American Free Trade Area (NAFTA) and the Asia-Pacific Economic Community (APEC) on the international trading system as a result of the proliferation of regional trading arrangements in the 1990s created the anxiety that they may turn inwards and flout the rules of the multilateral trading system and even oppose it. This was essentially because trade theory was not certain on their impacts on the system and various scholars took opposing views which all have some merits. This work took a historical approach by looking at the institutional policy implementation and performance features of the three major blocs to determine their impact on the multilateral system. The conclusion was that both the EU and NAFTA exhibit both protectionist and liberalizing tendencies both in policy and its implementation. Consequently their impact depended on the policies being implemented. APEC was peculiar in the sense that its guiding principle had been open regionalism. The Asian members had been avid supporters of the multilateral system because they had benefited from it. They took the regional approach on survival instinct and as an alternative path to global free trade. Based on the findings the research concludes, and in support of theory, that regionalism is not necessarily harmful to multilateralism. The outcome depends on the net effect of the trade creation and deflection associated with it. If the net effect is trade creation and so welfare enhancing then regionalism becomes a “stepping stone” and an alternative path to global free trade otherwise it becomes a “stumbling bloc”.