Regional Economic Integration and the Formation of Global Trading Blocs: An Historical Analysis of the 1980s

Abstract

This paper undertakes an historical analysis of regional trading bloc formation in the 1980s. This time period was characterized by the formation of major global trading blocs, especially the European Union and the North American Free Trade Agreement (NAFTA), at the same time existing national structures broke apart, most notably the Soviet Union. A gravity model based analysis of trade flow data indicates that two forces operated simultaneously during the study period, one leading to the formation of trading blocs (as captured by a dummy variable for “same regions”) and the other leading to the dissolution of trading blocs (based on the interaction of GNP and the dummy variable for “same regions”)