ABSTRACT
Two powerful forces have been reshaping the world economy in recent years. One is known loosely as globalisation and refers to the increasing integration of the world economy through an intensification of international trade and foreign direct investment. The other major force is regionalism, the promotion by governments of closer economic links between neighbouring countries. The most developed example of regionalism is the European Union, but regional trade arrangements have proliferated elsewhere in recent years. To some extent regionalism and globalisation drive economies in the same direction of increased cross-border interaction. However, there are also potentially opposing forces to the extent that regionalism encourages closer integration among neighbouring economies at the expense of links with the rest of the world. This raises important issues about the nature of and motivation for regionalism, and the effectiveness of international economic cooperation through multilateral institutions such as the World Trade Organisation (WTO).
