This paper summarizes recent research by the authors on the effects of free trade areas (FTAs). Within our model, which emphasizes inter-continental transport costs, several conclusions arise. (1) FTAs are likely to be detrimental over a moderate range of parameter values, even if drawn along...

Using the gravity model, we find evidence of three continental trading blocs: the Americas, Europe and Pacific Asia. Intra-regional trade exceeds what can be explained by the proximity of a pair of countries, their sizes and GNP/capitas, and whether they share a common border or language. We...