![]() ![]() He suggests that world welfare is generally minimized especially when there are three blocs. Krugman (1991), on the other hand, has developed a simple economic model to conclude that world welfare is not maximized unless the number of blocs is either one or very large. On the welfare impact of the formation of regional trading blocs, Kemp and Wan (1976), for example, show that if countries form into trading blocs by eliminating the barriers to internal trade and imposing a set of common external tariffs (CET) on imports from all countries outside the bloc, the welfare of the union as a whole improved and that of the rest of the world did not fall. Another issue is whether the regional trade blocs contribute to further trade liberalization with non-members countries or undermine it. One is the question of what would happen to world welfare if the world economy could become fragmented. ![]() With regard to the growth in importance of regional trading bloc, two issues have been raised in the literature. At present, almost all WTO members belong to at least one regional arrangement. Between 19, according to Chang and Winters (1999), 87 regional agreements were notified to the WTO. In Europe, the European Union (EU) and the European Free Trade Association (EFTA) finalized their membership after Sweden, Finland and Austria withdrew from EFTA to join the EU in 1995. Along the continental lines, the North American Free Trade Agreement (NAFTA) and the Common Market of the Southern Cone (Mercosur), involving Argentina, Brazil, Paraguay and Uruguay, were created in the Americas, while the ASEAN Free Trade Area (AFTA) was formed in 1992 in Asia. Regional trade agreements have become much more popular during the last decade. After employing the trade intensity indices of non-members, which controls for the overall growth in members' trade relative to world trade, it is found that remarkable growth of the intra-regional trade of Mercosur has been accompanied by simultaneously increasing trade flows with non-member states such as Canada and the US. Using the case of Mercosur, the trend of intra-regional trade flows and of extra-bloc trade flows with the selected 2 countries, Canada and the US, after formation of Mercosur in 1991 is examined. The effects of the regional trade bloc on non-member countries are examined. After employing the trade intensity indices of non-members, which controls for the overall growth in members' trade relative to world trade, we find that the remarkable growth of the intra-regional trade of Mercosur has been accompanied by simultaneously increasing trade flows with non-member states such as Canada and U.S. Using the case of Mercosur, we examine the trend of intra-regional trade flows and of extra-bloc trade flows with the selected two countries, Canada and U.S., after formation of Mercosur in 1991. The Trade Effects on the Non-Member Countries of the Regional Integration: The Case of the Mercosur ![]() Trade Effects on the Non-Member Countries of the Regional Integration: The Case of the Mercosur, The ![]()
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