Economic Regionalism:Two 20th-Century Episodes 93 indicating whether two countries are members of the same regional grouping.Variations in intra-regional trade would be due solely to the proximity of countries and their rates of eco- nomic growth.In fact,many of the dummy variables for membership in the same regional grouping are highly significant statistically.(These variables appear with the subscript"2" to denote the fact that both countries are members of the regional grouping.)Consider the results for 1980.The coefficients imply that two countries both located in the Asia/Pacific region traded almost five times as much as would two otherwise similar countries [exp(1.58)-4.85].Two countries both located in East Asia traded an cstimated twice as much [exp(0.86)=2.36].The coefficients for membership in the EU and EFTA are smaller and less consistently significant.There is no evidence of a NAFTA effect in any of the sub- sequent years.There is some,albeit less than overwhelming,evidence of a pro-trade bias among the members of MERCOSUR and,to a lesser extent,the Andean Group. Each equation also includes a second dummy variable set to unity when only one of two trading partners is a member of the regional grouping in question.(These terms appears with the subscript"N'to denote trade with nonmembers of the group.)A negative coeffi- cient indicates trade diversion:that members of a regional grouping trade less with non- members than their economic characteristics and the average behavior of countries in the sample would predict.The 1980 estimates suggest that EFTA was trade diverting.EFTA members traded 23%less with nonmembers than did other countries in the sample,control- ling for other characteristics [exp(-0.26)=.77].On the other hand,most of the"subscript- N"coefficients are significantly positive for East Asia and the EU,indicating that these countries opened up to trade with nonmembers at the same time as they liberalized trade within the region.There are,however,variations in the signs and significance of these coefficients over time.The coefficient for East Asia turns negative in 1985,although it is again positive in 1990.That for APEC turns negative in 1990,although it is insignificantly different from zero at conventional(95%)confidence levels.There is some indication that the members of NAFTA traded less with other parts of the world than would be predicted by their economic characteristics and average behavior of other countries in the sample, although there is no evidence that this effect increased with the negotiation of free trade agreements first between the United States and Canada and then with Mexico. On balance.these results point to the conclusion that the regional trade arrangements of the 1980s were trade creating rather than trade diverting.The strongest evidence of trade- creating effects is for the countries bordering on the Pacific. The Interwar Years Tables 3 and 4 provide comparable analyses for the interwar years.Table 3 displays intragroup trade shares and intragroup trade normalized by the group's share of world trade for the principal potential trade blocs of the period.We adopt an inclusive definition of potential blocs,considering the British Commonwealth,the German sphere of commercial influence (Germany,Austria,Brazil,Bulgaria,Czechoslovakia,Greece,Hungary,and Romania),the dollar area(the Western Hemisphere minus Brazil and Canada),the yen bloc (Japan,Korea,Formosa,and Manchuria),the franc zone(France,Algeria,Tunisia, French Morocco,French Africa,and French Indo-China),and the guilder zone (the Neth- erlands and the Dutch East Indies). Ratio 1 and Ratio 2 behave quite differently in the different cases.There is an upward shift in 1935 in the intra-bloc trade of both the British Commonwealth and the franc zoneEconomic Regionalism: Two POth-Century Episodes 93 indicating whether two countries are members of the same regional grouping. Variations in intra-regional trade would be due solely to the proximity of countries and their rates of eco￾nomic growth. In fact, many of the dummy variables for membership in the same regional grouping are highly significant statistically. (These variables appear with the subscript “2” to denote the fact that both countries are members of the regional grouping.) Consider the results for 1980. The coeffkients imply that two countries both located in the Asia/Pacific region traded almost five times as much as would two otherwise similar countries [exp( 1.58) = 4.851. Two countries both located in East Asia traded an estimated twice as much [exp(0.86) = 2.361. The coefficients for membership in the EU and EFTA are smaller and less consistently significant. There is no evidence of a NAFTA effect in any of the sub￾sequent years. There is some, albeit less than overwhelming, evidence of a pro-trade bias among the members of MERCOSUR and, to a lesser extent, the Andean Group. Each equation also includes a second dummy variable set to unity when only one of two trading partners is a member of the regional grouping in question. (These terms appears with the subscript “w’ to denote trade with nonmembers of the group.) A negative coeffi￾cient indicates trade diversion: that members of a regional grouping trade less with non￾members than their economic characteristics and the average behavior of countries in the sample would predict. The 1980 estimates suggest that EFTA was trade diverting. EFTA members traded 23% less with nonmembers than did other countries in the sample, control￾ling for other characteristics [exp(-0.26) = .77]. Gn the other hand, most of the “subscript￾N” coefficients are significantly positive for East Asia and the EU, indicating that these countries opened up to trade with nonmembers at the same time as they liberalized trade within the region. There are, however, variations in the signs and significance of these coefficients over time. The coefficient for East Asia turns negative in 1985, although it is again positive in 1990. That for APEC turns negative in 1990, although it is insignificantly different from zero at conventional (95%) confidence levels. There is some indication that the members of NAFTA traded less with other parts of the world than would be predicted by their economic characteristics and average behavior of other countries in the sample, although there is no evidence that this effect increased with the negotiation of free trade agreements first between the United States and Canada and then with Mexico. On balance, these results point to the conclusion that the regional trade arrangements of the 1980s were trade creating rather than trade diverting. The strongest evidence of trade￾creating effects is for the countries bordering on the Pacific. The lntetwar Years Tables 3 and 4 provide comparable analyses for the interwar years. Table 3 displays intragroup trade shares and intragroup trade normalized by the group’s share of world trade for the principal potential trade blocs of the period. We adopt an inclusive definition of potential blocs, considering the British Commonwealth, the German sphere of commercial influence (Germany, Austria, Brazil, Bulgaria, Czechoslovakia, Greece, Hungary, and Romania), the dollar area (the Western Hemisphere minus Brazil and Canada), the yen bloc (Japan, Korea, Formosa, and Manchuria), the franc zone (France, Algeria, Tunisia, French Morocco, French Africa, and French Indo-China), and the guilder zone (the Neth￾erlands and the Dutch East Indies). Ratio 1 and Ratio 2 behave quite differently in the different cases. There is an upward shift in 1935 in the intra-bloc trade of both the British Commonwealth and the franc zone