REGIONAL COOPERATION AND ECONOMIC INTEGRATION

PART I:
ratio could ultimately raise per-capita income by five percent (cautiously taking the lower
bound of the estimates by Frankel and Romer), and one would in general also expect a five
percent rise in the income of the different society segments; owners of labouer and owners
of capital for instance. .
But it is important to underline that there is nothing guaranteed about this outcome in
relation to the open trade benefits among the people in the nation. Many factors can
influence both growth and distribution of open trade effects. Further, the success of a trade
opening is itself often affected by the macroeconomic climate, the quality of institutions
and other factors.
One part of neoclassical trade theory gives some evidence on the potential problem of
non equal distribution of the open trade environment benefits among the society groups
or segments. The distribution of gains in case of fully employed and open economy
following neoclassical approach developed by Heckser -Ohlin and specified by Stolper-
Samuelson theorem shows uneven distribution of the open trade benefits among social
population groups. The theorem is one of basic concepts in the theory of trade, describing
relation between the relative prices of goods’ output, in the situation of with open trade,
and relative factor rewards, specifically, real wages real and real returns to capital. More
abundant and more intensively used production factor creates exports. The owners of such
production factor experience relative increase of their incomes in relation to the owners
of the other production factor. Free and open trade inside the society according to the
theorem distributes benefits of open trade unevenly among domestic society groups. In
spite of restrictive assumptions; like total trade openness, full employment of factors in the
economy and perfect factor mobility within the nation and none towards other countries,
still the theorem delivers an important message for real trade environment today. It shows
that expected general benefits of trade opening might not been evenly distributed among the
groups in the society. Such fact suggests that discussion on further trade opening whether
on multilateral or regional – FTAs- bases might not be evenly acceptable and supported by
all society groups. Uneven distribution of trade benefits might lead to the use of economic
policies and measures which could try to “correct” the “unacceptable” distribution of the
free trade benefits inside the society. Further more the interest to intervene by economic
policy measures could be further stimulated and increased by the next theoretically known
inequality created by free trade in distribution of the benefits.
Classical and neoclassical trade theory show (under usual assumptions) that expected
trade benefits when trade is free or liberalized will create as analyses show an increase
in GDP growth. Even in the most theoretical case when as a result of trade liberalization
all countries will experience 1,5% point higher GDP growth, actual benefits measured by
the size of GDP increase will substantially differ amng the countries. Explanation of that
fact is obvious. But the message is that because of the similar liberalization efforts actual
GDP increases are strongly different than interest for trade liberalization among countries
might be strongly different. Obviously nations with higher GDP levels could expect larger
increase in the absolute value of GDP as poorer or less developed countries.
If we connect such potential reservation to the trade liberalization process among differently
developed countries (developed and less developed) with the actual differences in the society
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