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The remaining entity to which the United Nations (UN) Council has delegated its Chapter VII powers is regional arrangements or agencies. This chapter examines this particular delegation, first by looking at the competence of the Council to delegate Chapter VII powers to regional arrangements. There are two issues which arise in such cases. The first is the legality of a delegation to a regional arrangement from the perspective of the UN; the second is the legal implications of such a delegation from the perspective of the regional arrangement. The legality of the practice of the Council in delegating Chapter VII powers to regional arrangements, in particular to the North Atlantic Treaty Organization (NATO), is discussed, together with the legality of the exercise of these powers by the regional arrangement concerned. The policy considerations relating to delegation of Chapter VII powers to regional arrangements are also explored.

Analyses the new regionalism that emerged in the mid‐1980s. By downplaying the significance of trade diversion and emphasizing scale‐based and pro‐competitive benefits of integration, the new regionalism had a more positive vision of RTAs than mainstream customs union theory had. Section 1 introduces economies of scale and imperfect competition. Section 2 analyses non‐tariff barriers to trade. Section 3 covers ‘new areas’ of foreign investment, competition policy, and monetary integration, which had not featured in mainstream customs union theory. Section 4 deals with rules of origin, which had emerged as a major trade policy issue in the 1980s and 1990s.

Examines the systemic effects of RTAs on the global economy. Discusses why RTAs tend to proliferate as well as why the multilateral trading system's basis in non‐discriminatory trade policies is resilient. Finally, addresses the question of whether RTAs are building blocks or stumbling blocks in the construction of a liberal international trading system.

Deals with the fundamental question of what should be the unit of analysis in trade theory, which has been driven in part by difficulty in determining the analytical status of the EU; is intra‐EU trade international or domestic trade? Presents models of the economic determinants of the number of nations (Sect. 1) and the optimum size of nations (Sect. 3). Also addresses the issues of which partners will be selected for RTAs (Sect. 2) and of sub‐regional zones that cover regions of more than one country but not the entire national economies (Sect. 4), as well as other geographical issues.

Addresses the question of why RTAs exist. Section 1 lists four proximate explanations on the basis of the immediate consequences of RTAs. Section 2 draws on the political economy of trade barriers literature to explain RTAs in terms of the impact on various groups with differing degrees of influence over trade policy formation and implementation. Section 3 offers some concluding observations.

Other free trade areas and customs unions have been less intensively studied than the EU or NAFTA. RTAs among developing countries have not had a great impact, often because paper agreements were not fully implemented, or where they have had an impact they have not survived, sometimes because they involved trade diversion that turned out to be costly for some members. Section 2 deals with RTAs among centrally planned economies.

Section 1 of this chapter investigates whether RTAs have led to increased regionalization of world trade. Section 2 reports on studies using CGE models to identify gainers and losers from the spread of RTAs as opposed to non‐discriminatory trade liberalization. Section 3 draws conclusions, emphasizing that the problem for all empirical work on RTAs is our poor knowledge of elasticities of substitution between imports from different sources.

Deals with empirical work on North American regional trading arrangements. Section 1 reports estimates of the impact of a free trade area between the USA and Canada. This literature was innovative in trying to account for scale economies and general equilibrium effects of an RTA. The remainder of the chapter deals with the effects of the North American Free Trade Agreement (NAFTA) on the three signatories (Sect. 2) and on non‐member countries (Sect. 3). Section 4 draws conclusions.

Japan has long experience in developing, and (to a lesser extent) legitimising, multi-level governance processes at least within its borders. Ironically, just as self-regulation and co-regulation have become the buzzwords in Europe and Australia since the 1990s, Japan is moving in the other direction: towards a more straightforward form of liberal law making and law enforcement. Aiming at further happy convergence, Japan should now redefine and redirect its multi-level governance system, to include a new external dimension in the form of regional arrangements. One possibility is to add clearer provisions on regulatory harmonisation, and develop new EU-like institutions – or at least processes – within Japan's recent bilateral arrangements.

This chapter calls for a reform of the international reserve system to address its three fundamental flaws: it has a deflationary bias as the burden of adjustment falls on deficit countries; it has inherent sources of instability associated with the use of a national currency as the major reserve asset and the high demand for foreign exchange reserves by developing countries, due to the pro-cyclical nature of cross-border capital flows and the inadequate availability of “collective insurance”; it exacerbates inequities by transferring resources to reserve currency-issuing countries. The chapter proposes a new system based on the countercyclical issue of Special Drawing Rights (SDRs) to finance International Monetary Fund (IMF) facilities, together with a network of regional reserve funds. It also stresses the need to consider regional monetary arrangements as part of the broader reform of the international monetary system. Finally, it highlights two complementary reforms: placing the IMF at the center of world macroeconomic policy management and rethinking the regulation of capital accounts in light of a reformed global financial system.

This chapter examines the impact of free trade agreements (FTAs) on foreign trade in East Asia. It reviews recent developments in FTAs and analyzes trade and protection patterns in East Asia. The analysis reveals that the effects of regional arrangements are positive for members but can adversely affect outsiders even though the actual effects on trade patterns may be small in practice. The result also indicates that the sectors with a comparative advantage increase output and those with strong protection increase exports.