The Political Economy of a Trade-First Approach to Regionalism

Regional integration has become commonplace in the world economy. Moreover, there is clear evidence of a "trade first" approach to regionalism. What is the logic behind this approach? Does trade integration prepare the ground for monetary integration by helping to fulfil optimum currency area criteria? Having analysed the economic inter-relationship between regional trade integration and monetary union, this paper contends that the "trade first" strategy can instead be explained in political economy terms; there is a higher political return to trade integration. This paper concludes by examining the implications for the future of both regionalism and multilateralism.