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Spaghetti regionalism

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  • Caroline L. Freund

Abstract

This paper examines the welfare implications of multiple free trade agreements in a model of imperfect competition. We show that free trade is the unique Nash equilibrium under the simple rule that any two countries can form a bilateral free trade agreement. Specifically, a country is always better off forming a bilateral trade agreement with every other country, irrespective of previous agreements. This suggests that each new preferential free trade agreement may be a step towards multilateral free trade.

Suggested Citation

  • Caroline L. Freund, 2000. "Spaghetti regionalism," International Finance Discussion Papers 680, Board of Governors of the Federal Reserve System (U.S.).
  • Handle: RePEc:fip:fedgif:680
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    File URL: http://www.federalreserve.gov/pubs/ifdp/2000/680/ifdp680.pdf
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    References listed on IDEAS

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    13. Freund, Caroline, 2000. "Multilateralism and the endogenous formation of preferential trade agreements," Journal of International Economics, Elsevier, vol. 52(2), pages 359-376, December.
    14. Richard Baldwin, 1993. "A Domino Theory of Regionalism," NBER Working Papers 4465, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Furusawa, Taiji & Konishi, Hideo, 2007. "Free trade networks," Journal of International Economics, Elsevier, vol. 72(2), pages 310-335, July.
    2. Ibarra-Yunez, Alejandro, 2003. "Spaghetti regionalism or strategic foreign trade: some evidence for Mexico," Journal of Development Economics, Elsevier, vol. 72(2), pages 567-584, December.
    3. Christopher Findlay, 2001. "Old Issues in New Regionalism," Asia Pacific Economic Papers 311, Australia-Japan Research Centre, Crawford School of Public Policy, The Australian National University.

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    Keywords

    Free trade; International trade;

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