By Jan Joost Teunissen (editor)
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Additional resources for A regional approach to financial crisis prevention: lessons from Europe and initiatives in Asia, Latin America and Africa
There may also be tensions between members of the RTA and non-members who may find that trade diversion within the RTA results in lost markets. In a sense trade ‘gives people something to fight about’. Neither are trade institutions necessarily the best mechanism to mediate disputes – especially if those disputes have wider social and political dimensions. In conflict prone areas, international institutions built around trade agreements can have adverse effects on conflicts among member states by mismanaging crisis situations and worsening conflict intensity, or producing rivalry among states due to their relative social positions (HafnerBurton and Montgomery 2005).
Representing 67 per cent of Latin America’s land area,4 47 per cent of its population and more than half of Latin America’s gross domestic product (GDP);5 it is the most progressive trade integration scheme in the developing world. MERCOSUR’s model of ‘open regionalism’6 aims to create a common market in the mid-term future. International relations scholars view the model as a crucial step to overcome the historic agenda of Downloaded by [INFLIBNET Centre] at 05:59 01 December 2012 Regional trade integration and conflict resolution 18 grievances, mutual distrust and diverging interests within the region (notably by linking the Southern Cone’s rival regional powers, Brazil and Argentina).
RTAs can help to reinforce both the perception and reality of trade dominance by an external power. Public perceptions of trade dominance can be a powerful force. Examples of such sentiment can be seen in the anti-globalisation riots of Seattle and Genoa or in the way US headquartered franchises based in developing nations are treated during times of protest against US foreign policy. In extreme circumstances, such strong domestic opinion can undermine peaceful relations between countries. Finally, RTAs can generate high expectations of increased economic growth, new job opportunities and reduced poverty.