We study a Free Trade Area with Rules of Origin and show that there are two distinct regimes. Comparative statics results for the two regimes are exact opposites and a regime switch occurs when become restrictive enough. Consequently, imports into the of the intermediate good first fall and then...

In this paper we look at the welfare effects of trade reform in the many-consumers case. We show that Pareto-improving reforms with lump-sum taxation or with non-lump-sum taxation are possible in the small country case if sufficient conditions for welfare to rise in the single-consumer case are met.