A Study Of "the New Regionalism"

The new regionalism is here to stay and it's quite different from the "old" one, which started from 1950s and finally failed. At the same time, the multilateral trade negotiation makes little progress. Naturally, two questions are given: what's the relationship between the regionalism and multilateralism? What kind of RTA partner should the developing countries choose? These are the major topics that the thesis is trying to deal with.As for the relationship between the regionalism and multilateralism, the conclusions are made as follows by analyzing the modified model which comes from Ethier (1998, 2001). The new regionalism may come from the past success of the multilateralism; regionalism and multilateralism may be in bandwagon in succession, which means multilateralism may be popular after the new regionalism tide. In the case of "spaghetti bowl" regionalism, it may help because of the unbundling, which rearranges the political economic forces of being against and for the rules of origins and bilateral cumulation, making countries try to harmonize the different rules of origins and favor diagonal cumulation. The empirical study about the regional preferential tariff and the MFN tariff showed, they are positively related, which means regionalism helps multilateralism.What kind of partners should the developing countries choose in the "new regionalism" bandwagon? The analysis is based on the comparison of the South-North and South-South RTAs and the empirical study of the "Natural Trade Partner" hypothesis. Firstly, it is found that South-North RTAs can bring more trade creation and less trade diversion than South-South ones by analyzing the panel data about 178 countries in 1948-1999 using the gravity model, so does the new regionalism than the old one. Also the "Natural Trade Partner" hypothesis is testified. Secondly, the estimation of Knowledge-Capital model about OECD countries and ASEAN 8 countries in 1991-2000 demonstrates: South-North RTAs can bring more FDI than South-South ones. So the developing countries can gain more from South-North RTAs because of the technological diffusion of FDI. After all, the best choice of RTA partners during economic integration for the developing countries is the developed ones and the "Natural Trade Partner". So, China should concentrate on East Asia, forming RTAs with Japan and Korea. Considering the Japan's reluctant attitude, China should enter into a RTA with Korea as soon as possible, forcing Japan to join and finally combining with CAFTA into East Asia Free Trade Area. China's benefits are maximized because of its hub position during the process.The developing countries should handle the relationship between the regionalism and the multilateralism properly. In the "spaghetti bowl" regionalism, the hub country gains at the expense of the spoke one. But it is no good for countries to enter into as many RTAs as possible, since the "spaghetti bowl" regionalism can bring countries costly management fee and the multinational corporations more transaction cost. So the developing countries should not abandon the multilateralism when taking active part in regional economic integration. And they should take the "open regionalism" policy, i.e. keep low MFN tariff, so that the trade diversion can be minimized, the hub countries and the spoke ones can both benefit.