An analysis of criteria to determine the basis on which to form a multiunit or regional grouping and whom to keep in and whom to keep out. The usual criterion has been geographic proximity as a means of saving transportation costs, but new technology has made distance a decreasingly reliable indicator of such costs. Empirical work indicates that geographic distance is only one among several persistent influences on international transactions. Economic size, culture, and economic and technological structure all have greater individual or collective effects, and such influences trade off against distance at measurable rates that frequently favor the nondistance influences on transactions. For a given country, an optimal association with others should consider their larger GNP, their being closer rather than more remote, their highly developed trading sectors, a common language, and a different technology level. This paper is a substantially expanded version of P-4922. 36 pp. Ref.