Multilateralism and Regionalism

Multilateralism and Regionalism

Introduction

Many neoclassical economists have expressed concern over the phenomenon of regionalism with regard to the multilateral trading system. In terms of trade creation and trade diversion, they argue that a multilateral system versus a system comprised of regional trading blocs increases overall welfare through the shifting of production to the lowest-cost producers on a global scale (Trogan, 2006). With regard to the closed regionalism of the 1950s and 1960s, these economists argue that the increases in external trade barriers led to short-term welfare losses due to trade diversion. Furthermore, they argue, protection from external competition may have led to high-cost regional producers not having the incentives for more efficient production (Sajdik, 2007).

In the case of open regionalism, however, it appears that through strategic trade initiatives, where regional industries are exposed to external competition while receiving other incentives to produce more efficiently for export, the global trading system is not experiencing the pattern of protectionist trade blocs observed in the first wave of regionalism (Mattli, 2008). While it is unclear for certain, it is argued that a short-term decline in welfare may be experienced as a result of trade diversion within these regions. However, unlike the closed form of regionalism, it is also argued that this new form may be furthering the process of global economic integration and may perhaps lead to an increase in multilateral trade in the near to long-term future (Mansfield, 2007).

Regionalism

Regionalism must be understood in the context of the process of regionalization. Although definitions vary somewhat, regionalization is often compared to, and indeed is argued to act in tandem with, globalization, as a social process of integration that exerts pressure on states and societies (Bhagwati, 2007). Therefore, regionalism as understood as a state- and society-led process is seen to interact with the forces of regionalization in much the same way as regionalism interacts with the forces of globalization, as a source for social, political, and economic restructuring.

Multilateralism

The policy of multilateralism suggests that even the most powerful nations are ill-suited in the modern age to grapple effectively with global issues and challenges on their own. Although the pursuit of multilateralism requires states to relinquish some decision-making authority and freedom, proponents argue that such losses are outweighed by new capacities gained to achieve shared objectives (Trogan, 2006).

Discussion

If regions include more than geographic conceptions of regions, interregional relations may not be such an empirically new phenomenon (though it has been characterized as such). What is new, however, is interest in interregional relations and inter-regionalism (as opposed to regionalism, for example) as an area of study, even level of analysis, in the study of global politics and as a new layer in a multilevel, multifaceted system of global governance (Sajdik, 2007).

As in discussions on regionalism, the significance of interregional relations for governance can be viewed in at least two ways. On the one hand, it can be seen as complementary or supplementary to global multilateralism—another level of governance to manage a complex and interdependent ...