There has been a significant regionalization of international trade. In 1990, 37 percent of the foreign trade of Canada, Mexico, and the United States was bilateral trade between pairs of those three countries; by 2004, the figure had risen to nearly 44 percent. In 1990, 29 percent of the foreign trade of thirteen East Asian countries was bilateral trade between pairs of those same countries; by 2004, the figure had risen to 39 percent. (See Table 1.1.) Some but not all of this increase in regional trade reflects the formation of preferential trading arrangements, such as the North American Free Trade Area (NAFTA) and the Association of South East Asian Nations (ASEAN).

This book asks whether we should expect to see an analogous regionalization of the international monetary system over the next one or two decades, the form or forms that it might take, and the potential benefits and costs viewed from the standpoint of the participants. It also asks how regional monetary integration might affect outsiders, including, most important, the United States, because of the key role played by the U.S. dollar in the global monetary system.

Why do we ask these questions now? Over the past several years, a number of countries have given up their national currencies and replaced them either with a multinational monetary union or with a prominent international currency such as the U.S. dollar.