Economic Integration and Development
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Economic Integration and Development

Has Regionalism Delivered for Developing Countries?

Mordechai E. Kreinin and Michael G. Plummer

Mordechai Kreinin and Michael Plummer consider the implications of the emerging global trend of economic regionalism for developing countries. The analysis focuses on the trade and investment effects of integration in developed countries on developing countries, as well as the ramifications of regional integration in the latter. After an extensive review of the theoretical and empirical literature pertinent to the economics of regionalism, the book considers the ex-post trade and direct-foreign-investment effects of the Single Market Program in Europe and NAFTA, followed by chapters on ASEAN and economic integration in Latin America, primarily MERCOSUR.
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Chapter 1: Introduction and Summary

Mordechai E. Kreinin and Michael G. Plummer


Has regionalism delivered for developing countries? In one word, the answer is a qualified ‘no’. This conclusion, however, requires a book-long explanation. In the last two decades, concern has intensified in the developing world over the possibility of trade and investment diversion caused by regional groupings among industrial countries. This was due not only to the potential closing of existing markets in the short run (especially in view of the outward-oriented development strategy that many of these countries began to adopt over this period), but also to the potentially damaging policy precedent that it would set. In turn, there has been an enhanced tendency towards regionalism in both Europe and North America, where regional groupings embraced only industrial or industrial-and-developing countries. Examples are the widening of the European Union (EU) towards Eastern Europe and its deepening through the Single Market Programme (EC-92) and the European monetary union; the creation of the Canada–USA Free-Trade Area (CUSTA) and the North American Free-Trade Agreement (NAFTA), which for the first time brought together a major developing country and developed countries. In fact, Japan and Korea are the only major countries that have not joined in any regional grouping, and even they are contemplating regional alliances.1 This trend has intensified partly because of the fragility of the World Trade Organization (WTO), where the 1999 Seattle ministerial meeting failed to launch the anticipated Millennium Round. In large measure, this failure was due to the US insistence on labour and environmental standards which developing countries, in...

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