Dispelling the Myth of Globalization: The Case for Regionalization.

Hung-Gay Fung

In this relatively short book, the world trading system is shown to coalesce into a set of geographic trade zones. In addition to the discussion of the tripolar trading system (Europe, Asia and North America), the development of other trading regions including Eastern Europe and Sub-Saharan Africa is analyzed. An implication of the analysis suggests that an orientation toward world global market may be misleading. Instead, regionalization is considered to be a strong force that still continues to effect standards of living and the balance of economic power throughout the world. The book is timely and very well-written. It provides many historical citings that have led to the recent development of regionalization.

The book has seven chapters. Chapter One illustrates the growth of different geographic trade zones and discusses the economic and debt problems in Latin America. It suggests that the United States should better understand the concept of regionalization and, in turn, the impact of regional problems from the Latin America countries.

Chapters Two and Three highlight the Japanese economic expansion policy that has led to its role as a leader in the Asian region as well as the world. In addition, it argues that Japan has also played a locomotive function in stimulating growth of many Asian countries.

Chapter Four concludes that the United Kingdom may emerge as the most economically powerful country in the European Community because the United Kingdom has substantially improved its financial strength, while Germany will be fully preoccupied with its unification with East Germany. Finally, competition between Japan and Germany is analyzed using the auto industry as an illustration.

These chapters illustrate the development of regionalization, in particular, the emerging tripolar system; one basic issue regarding whether regionalization leads to global trade diversion or creation has not been raised or answered. In fact, given the development of regionalization, the General Agreement on Tariffs and Trade's (GATT) statistics show that global trade has increased. In addition, in Asia and North America, the inter-regional trade exceeds the intra-regional trades. Thus, it can be argued that regionalization paradigm can be misleading because it overlooks the importance of the underlying trend toward greater economic integration at the global level.

Chapter Five focuses on the development of Soviet Union and Eastern Europe into world markets. It was shown that although these countries are richly endowed with natural resources, decades of mismanagement and war have led them to poverty. In addition, this chapter suggests that the three Eastern European countries (Czechoslovakia, Yugoslavia and Hungary) could capitalize on their competitive advantages by forming a trading block in the region.

Chapter Six analyzes the Sub-Saharan Africa, the world's poorest region. These countries, in spite of their wealth of natural resources, have the highest debt to Gross National Product ratio among other trade zones, experience large trade deficits and have received the least among of financial aid/assistance from industrialized governments. The chapter ends with a proposed strategy that builds on strength by unifying all countries in the region and seeks technical help from African Americans because of their roots.

The final chapter talks about strategies for the United States given the regional development. Various issues including the promotion of small business, the need for small auto manufacturers and migration of people away from cities to the suburban areas are discussed.

Although the strategies discussed in the chapter are appropriate, they tend to be microscopic. Many issues about regional strategies/policies are entirely left out. These include exchange rate and monetary policies among countries within the trading zone. In addition, another interesting issue relating to the linkage of the financial markets within the region and among regions is not discussed in the book.

Trade and currency zones will change economic relationships within geographic regions and relationships among regions of the world economy. This result may suggest a different or stronger role played by the GATT and more coordinating efforts among trading blocks to further promote trade at the global level. Should the book include these discussions, it would be much wider in scope and richer in implications.

In summary, although the book is somewhat limited in scope, it is valuable; it provides a clear picture of the regional development and suggests some strategies for promoting economic growth. It is a helpful reference for those who are interested in analyzing economic trends and economic developments and for policymakers in international economics.