Challenges to Economic Cooperation
Chapter 4: Economic Regionalization in Western Europe: Search for a New Paradigm
Page 32 4 Economic Regionalization in Western Europe: Search for a New Paradigm BEYOND A CUSTOMS UNION/A FREE TRADE AREA Jacob Viner’s pioneering work, The Customs Union Issue (1950) remains the classic treatise on economic regionalization. Removal of trade barriers, Viner argued, would add to the flow of trade among trading countries. In addition, free flow of trade would contribute to competitive price rationalization in all trading economies, much to the gain of consumers in all countries. No economic principle ever works without qualification. The question has been raised whether Viner failed to adjust his simple model of customs union for “trade diversion” (Schott 1989a, pp. 1–50), and/or for “trade repression” à la StolperSamuelson Condition (Park and Yoo, 1989, pp. 143–4). Notwithstanding the fact that a customs union and a free trade area are not identical expressions of multinational regional grouping, Viner’s thesis on customs union has been the core economic rationale for FTAs, and its critiques question whether they are basically superior to GATT (Wonnacott and Lutz 1989) and WTO as of 1995, except for the fact that the pace of negotiation in an FTA may be relatively fast, as it generally involves “likeminded” peoples/countries (CanadaU.S. FTA, U.S. Israel FTA). A bilateral FTA, irrespective of the fact of “likemindedness” of the two parties to the agreement, is certainly not comparable to GATT negotiations where negotiations among its 150plus sovereign memberstates have been known to be painfully slow. Illuminating discourses on bilateral FTAs,...
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