Contingent Effectiveness of Regional Trade Agreements, 1958-2012: The Conditioning Effects from Homophily and World-System Status

• In Event: 4255 - Section on Economic Sociology Roundtables (1 hour)
  In Refereed Roundtable 60min: 7. Law, Regulation, Policy

Abstract

Borrowing insights from economic sociology, this study highlights the dual “embeddedness” of regional trade agreements (RTAs) and examines the contingent nature of their trade-promoting effect. First, RTAs are embedded in dyadic relations. Geographic, political, and cultural proximity provides a favorable institutional environment (dyadic homophily) for the materialization of the trade-expanding potential unleashed by RTAs. Current RTAs are predominantly focused on reducing trade barriers (negative integration) with little attention to creating effective institutions (positive integration), thereby rendering the actual effectiveness of RTAs dependent on dyadic homophily. Second, RTAs are also embedded in the overall world system. RTAs between rich countries boost trade more effectively than those between less developed countries. Less developed countries have limited economic power and lack the capacity or intention to implement policies stipulated in RTAs. Overall, the dual “embeddedness” and its resulting differential effectiveness of RTAs is expected to intensify regionalized fragmentation and increase the North-South divide in global trade.

Author

• Min Zhou, University of Victoria