This paper examines the welfare effects of the formation of a free-trade area (a set of countries that abolish tariffs among member countries but let individual member countries to set external tariffs). If a representative consumer has love-of-variety preferences the welfare function exhibits...

This paper reviews the most significant recent developments in the theory of trade agreements. The paper offers an integrated approach to evaluating trade agreements, and uses the approach to present results on preferential and multilateral trade agreements. The paper identifies also several...