The quantum of intra-regional trade among the countries of the world is explained by :

A major share of international trade takes place as intra-regional and intra-industry trade among countries with similar factor endowments and income levels (such as within the European Union or North America). Traditional comparative cost theory and Heckscher-Ohlin theory explain inter-industry trade between dissimilar countries based on differences in technology or factor endowments, and cannot account for the large volume of trade among similar countries within the same region. New trade theories based on imperfect (monopolistic) competition, product differentiation, and increasing returns to scale explain this trade.