Author : Jeffrey A. Frankel
Release : 1993
Genre : International economic integration
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Continental Trading Blocs - read free eBook in online reader or directly download on the web page. Select files or add your book in reader. Download and read online ebook Continental Trading Blocs write by Jeffrey A. Frankel. This book was released on 1993. Continental Trading Blocs available in PDF, EPUB and Kindle. Using the gravity model, we find evidence of three continental trading blocs: the Americas, Europe and Pacific Asia. Intra-regional trade exceeds what can be explained by the proximity of a pair of countries, their sizes and GNP/capitas, and whether they share a common border or language. We then turn from the econometrics to the economic welfare implications. Krugman has supplied an argument against a three-bloc world, assuming no transport costs, and another argument in favor, assuming prohibitively high transportation costs between continents. We complete the model for the realistic case where intercontinental transport costs are neither prohibitive nor zero. If transport costs are low, continental Free Trade Areas can reduce welfare. We call such blocs super-natural. Partial liberalization is better than full liberalization within regional Preferential Trading Arrangements, despite the GATT's Article 24. The super-natural zone occurs when the regionalization of trade policy exceeds what is justified by natural factors. Estimates suggest that trading blocs like the current EC are super-natural.