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Economic Regionalization in the Asia-pacific

Economic Regionalization in the Asia-pacific

Challenges to Economic Cooperation

M. Dutta

This original and comprehensive book provides a unique insight into the development of economic regionalization, with special reference to the Asia-Pacific. It presents international globalization strategies from a historical perspective and then analyses the effects on the development of Asia-Pacific Economic Cooperation (APEC). Focusing on APEC itself, the author provides a detailed investigation into its organization and agenda, and thorough personal interviews with some of the most influential people who have worked for APEC.

Chapter 5: Pareto Optimality Condition and Economic Regionalization

M. Dutta

Subjects: asian studies, asian economics, economics and finance, asian economics, international economics


Page 40  5  Pareto Optimality Condition and Economic Regionalization  Regionalism without globalism, often referred to as “fortress regionalism’’ is an antithesis for maximizing the global output and therefore for global economic welfare.  Thus, regionalization is no substitute for interregional cooperation. Given the actual state of international economic relationships, not observed to be governed by  perfectly free and competitive market rules, à la Adam Smith’s “invisible hands”, they are indeed complementary.  Each economic region must be fully and wholly open to interregional global economic relations. The intraregional free flow of outputs and inputs can and must operate  to maximize global economic gains. If a given region can add to its economic gains without diminishing such gains for any other region, the second best condition for  Pareto optimality will have been achieved.  There exists no “true” measure of a Pareto­optimality condition in terms of economic welfare. Indeed, based on the trade­flow data, the EU has made economic gains  for its members by way of augmenting the intraregional trade. At the same time its share of trade with other regions—North America, the Asia­Pacific region, Africa  and elsewhere—has continued to increase. The interregional trade flow is a contribution to globalism and adds to global economic welfare. Intracommunity gains have  not limited the EU’s intercommunity economic activities. Of course, economic welfare is hardly a concept for unique measurement by trade flows.  The debate on “trade creation” vis­à­vis “trade diversion” remains to be resolved. The Vinerian paradigm argued for trade creation...

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