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Discuss pros and cons of multilateral trade liberalization

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1. Discuss the pros and cons of multilateral trade liberalization under the principle of unconditional MFN status versus the formation of regional trade arrangements.

2. Consider the following data detailing the situation for Macland before and after it forms a FTA with Mexland: Pre-FTA

  • Imports from Eurland: 110 million units
  • Imports from Mexland: 0 units Post-FTA
  • Imports from Eurland: 0 units
  • Imports from Mexland: 280 million units

How much trade was diverted by this agreement? How much trade was created? Suppose that Eurland charges $6 for this product and that Mexland charges $7. Suppose that Macland's original tariff was $2 per unit. Calculate the welfare gain or loss to Mexland from forming this FTA.

Reference no: EM132389461

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