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Integration of markets vs. integration by agreements, Volume 1
 
Author:Aminian, Nathalie; Fung, K.C.; Ng, Francis; Country:Latin America; East Asia and Pacific;
Date Stored:2008/03/04Document Date:2008/03/01
Document Type:Policy Research Working PaperSubTopics:Emerging Markets; Free Trade; Trade Policy; Trade and Regional Integration; Trade Law
Language:EnglishRegion:East Asia and Pacific; Latin America & Caribbean
Report Number:WPS4546Collection Title:Policy Research working paper ; no. WPS 4546
Volume No:1  

Summary: This paper provides an analysis of the two channels of regional integration: integration via markets and integration via agreements. Given that East Asia and Latin America are two fertile regions where both forms of integrations have taken place, the authors examine the experiences of these two areas. There are four related results. First, East Asia had been integrating via markets long before formal agreements were in vogue in the region. Latin America, by contrast, has primarily used formal regional trade treaties as the main channel of integration. Second, despite the relative lack of formal regional trade treaties until recently, East Asia is more integrated among itself than Latin America. Third, from a purely economic and trade standpoint, the proper sequence of integrations seems to be first integrating via markets and subsequently via formal regional trade agreements. Fourth, regional trade agreements often serve multiple constituents. The reason why integrating via markets first can be helpful is because this can give stronger political bargaining power to the outward-looking economic-oriented forces within the country.

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