Regionalism or Multilateralism? A Political Economy Choice

Giorgia Albertin

No 2008/065, IMF Working Papers from International Monetary Fund

Abstract: This paper provides a political economy analysis of the incentives underpinning a country's decision to enter a regional trade agreement when a multilateral free trade agreement is available, and of how entering a regional trade agreement affects the incentives to pursue multilateral trade liberalization. Taking into account the influence exerted by organized interest groups in the formation of trade agreements, we derive a formal condition under which a regional trade agreement is preferred to a multilateral one. Furthermore, we show that a country's decision to enter a regional trade agreement unambiguously undermines the incentives towards multilateral trade liberalization.

Keywords: WP; free trade; interest group (search for similar items in EconPapers)
Pages: 26
Date: 2008-03-01
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