Regional Integration and Incomplete Club Goods: A Trade Perspective

This Article undertakes the first systematic examination of RIAs as clubs in the legal literature and argues that although regional organizations exhibit some club-like dynamics they are at best incomplete forms of such cooperation. Two shortcomings are specifically identified. First, the Article shows that the legal architecture of trade agreements limits the degree to which regional organizations are truly exclusive. As a result, regional organizations provide fewer benefits to members than classic economic clubs. Second, regional organizations are heterogeneous in ways other than those envisioned in the classic economic club literature. Specifically, members differ not in terms of the degree to which they prefer the club good-as is the theoretical conception of heterogeneity in the club goods literature-but instead in terms of their qualitative characteristics and competitiveness. Each member will thus not only incur different costs in joining a regional organization, but will also have a different point at which the preferential trading market will be congested with too many competitors. This heterogeneity further suggests that, all other political factors being equal, expansion of an RIA\u27s membership will be based not so much on the economic competitiveness of new members, but instead on the inefficiency of a prospective member state\u27s domestic industries relative to those of each of the RIA\u27s members. Before proceeding, however, a brief note as to this Article\u27s methodology is in order. I consciously employ a series of hypothetical scenarios to demonstrate the welfare implications of certain RIA structural characteristics. Though virtually all of the examples are drawn from actual events identified in the Article\u27s footnotes, I use abstract labels (such as Country A as opposed to Germany ) to underscore the generalizability and broad applicability of the incentives many, if not most, members of RIAs face. By emphasizing the commonality of structural dynamics driving economic integration, I hope to spur a broader theoretical re-examination of regional trading blocs untethered from geographic or institutional qualifications