DP5775 Multilateralising Regionalism: Spaghetti Bowls as Building Blocs on the Path to Global Free Trade

Author(s): Richard Baldwin

Publication Date: August 2006

Keyword(s): domino effect , juggernaut effect , multilateralism , regionalism , RTB unilateralism , trade

JEL(s): F10 , F13 , F15 , F2

Programme Areas: International Trade and Regional Economics

Link to this Page: www.cepr.org/pubs/dps/DP5775.asp.asp

This paper addresses the final steps to global free trade – what they might look like, what sort of political economy forces might drive them, and what the WTO might do to guide them. Two facts form the point of departure: 1) Regionalism is here to stay; world trade is regulated by a motley assortment of unilateral, bilateral and multilateral trade agreements; 2) this motley assortment is not the best way to organise world trade. Moving to global duty-free trade will require a multilateralisation of regionalism. The paper presents the political economy logic of trade liberalisation and uses it to structure a narrative of world trade liberalisation since 1947. The logic is then used to project the world tariff map in 2010, arguing that the pattern will be marked by fractals – fuzzy, leaky trade blocs made up of fuzzy, leaky sub-blocs (fuzzy since the proliferation of FTAs makes it impossible to draw sharp lines around the big-3 trade blocs, and leaky since some FTAs create free trade ’canals’ linking the big-3 blocs). The paper then presents a novel political economy mechanism – spaghetti bowls as building blocs – whereby offshoring creates a force that encourages the multilateralisation of regionalism. Finally, the paper suggests three things the WTO could do to help.