The inherent tension between trade preferences and the Most-Favoured Nation (MFN) principle has been mainly examined in the context of regional free trade agreements and customs unions. Much less attention has been given to non-reciprocal special trade preferences given by developed countries to developing countries. WTO rules on these special preferences are less explicit than WTO rules govern...

Here a numerical simulation model, implemented in Excel, that can be used to expand student understanding of the theory of customs unions is presented. The model allows examination of core customs union issues including trade creation, trade diversion, and the Kemp–Wan theorem. By responding to an experimental assignment that guides them through the simulation, students are able to learn the th...

Preferential Trade Agreements (PTAs) are agreements among a set of countries involving preferential treatment of bilateral trade between any two parties to the agreement relative to their trade with the rest of the world. Preferences, however, need not extend to all trade between the two, and the coverage could depend on the type of PTAs. Customs unions and the so-called free trade areas are co...

Froposition. Ccnsiaer any competitive world trading ewilibrium, with any number of countries and commodities, and with no restrictions whatever on the tariffs and other commodity taxes of individual countries, and with costs of transport fully recognized. Now let any subset of the countries form a customs unton. Then there exists a common tartrvector and a system of lump-sum compensatory paymen...