Winners and losers from the gradual formation of trading blocs


Although global free trade is efficient, each country's benefit from free trade depends on the path that leads to the global free trade agreement. Using a dynamic model of trading bloc formation, we how that when global free trade is reached gradually, the countries that are initially excluded gain less than the rest and may be even made worse-off by the final free trade agreement, compared with the initial state of no trading blocs.
Published as: Winners and Losers From the Gradual Formation of Trading Blocs in Economica , Vol. 74, No. 296, 664--681, January, 2007