TY  - JOUR
AU  - Leamer,Edward E.
TI  - American Regionalism and Global Free Trade
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 4753
PY  - 1994
Y2  - May 1994
UR  - http://www.nber.org/papers/w4753
L1  - http://www.nber.org/papers/w4753.pdf
N1  - Author contact info:
Edward E. Leamer
John E. Anderson Graduate School of Management
UCLA
Box 951481
Los Angeles, CA 90095-1481
Tel: 310/206-1452
Fax: 310/825-4011
E-Mail: edward.leamer@anderson.ucla.edu
AB  - A free trade agreement supports global free trade since trade barriers tend to divert trade in favor of members, but not reduce imports.  The term: 'mutual assured deterrence' is used to refer to a regional free trade association that has the feature that no member can gain individually from the imposition of a barrier against a non- member.  Mutual assured deterrence is shown to be possible for a surprisingly rich set of partners. A customs union is compatible with global free trade if the vast majority of trade takes place naturally within the confines of the association.  A customs union that is likely to have this property would combine countries to form a nearly exact economic replica of the globe. The economic combination of Mexico and the United States doesn't form a replica of the global economy because, compared with Asia, North America has relatively high capital per worker even after adding the Mexican workforce.  However, NAFTA does seem to have the property of mutual assured deterrence, and may for that reason amount to a commitment to global free trade as well as regional free trade.
ER  -