REGIONALISM AND MULTILATERALISM - A POLITICAL-ECONOMY APPROACH

Preferential trading arrangements are analyzed from the viewpoint of t he ''new political economy'' that views trade policy as being determin ed by lobbying of concentrated interest groups. Two conclusions are re ached: first, that trade-diverting preferential arrangements are more likely to be supported politically; and second, that such preferential arrangements could critically change domestic incentives so multilate ral liberalization that is initially politically feasible could be ren dered infeasible by a preferential arrangement. The larger the trade d iversion resulting from the preferential arrangement, the more likely this will be the case.