An important point to remember from the theoretical analysis of economic integration is that the formation of a regional free trade area:

Question

Quizplus · Accepted Answer

The welfare effect of forming a regional free trade area is theoretically ambiguous because it can lead to both trade creation (which is beneficial as it replaces more expensive domestic production with cheaper imports from member countries) and trade diversion (which can be harmful as it replaces cheaper imports from non-member countries with more expensive imports from member countries).

An Important Point to Remember from the Theoretical Analysis of Economic