08. Regional Trade Agreements

Learning objectives

By the end of this chapter, you should be able to:

Define regional trade agreements.
Explain why RTAs are an exception to the MFN principle.
Distinguish between preferential trade areas, free trade areas, customs unions, common markets, and economic unions.
Explain trade creation and trade diversion.
Calculate the welfare effect of an FTA using a simple import-demand example.
Interpret TINA-style FTA simulation results in terms of trade creation and trade diversion.

Why this chapter matters

Regional trade agreements are common in the world economy. They can reduce trade barriers among members, increase market access, and support regional integration. However, RTAs are also discriminatory because they give better treatment to members than to non-members.

This creates a central policy question:

Key question

Does an RTA create new efficient trade, or does it divert trade away from lower-cost suppliers outside the agreement?

This question is especially important in agricultural trade because tariffs, standards, transport costs, and regional supply chains strongly affect food markets.

What is a regional trade agreement?

A regional trade agreement, or RTA, is a trade agreement between two or more countries that gives preferential market access to members of the agreement.

RTAs may reduce or eliminate tariffs, coordinate customs procedures, harmonize standards, or deepen economic cooperation.

RTAs are exceptions to the WTO most-favoured-nation principle. Under MFN, a WTO member should normally treat all WTO partners equally. Under an RTA, members give each other preferential treatment that is not automatically extended to non-members.

Why do countries form RTAs?

Countries form RTAs for several reasons.

Reason	Explanation
Market access	Firms gain easier access to partner-country markets.
Economies of scale	Larger markets allow firms to expand production.
Specialization	Members may specialize according to comparative advantage.
Investment attraction	Larger integrated markets may attract foreign direct investment.
Supply chains	Regional inputs and production networks may become easier to organize.
Political cooperation	RTAs may support diplomatic, security, or regional development goals.
Slow multilateral negotiations	Regional agreements may be easier to negotiate than global agreements.

Forms of regional integration

Regional integration can take several forms.

Form	Main feature	Example logic
Preferential trade area	Members reduce some trade barriers among themselves.	Partial tariff preferences.
Free trade area	Members remove most internal trade barriers but keep their own external tariffs.	Country A and B trade freely, but each has its own tariff toward Country C.
Customs union	Members remove internal barriers and adopt a common external tariff.	Members act together toward non-members.
Common market	Customs union plus free movement of factors of production.	Labor and capital can move more freely.
Economic union	Common market plus deeper policy coordination.	Members coordinate broader economic policies.

A free trade area requires rules of origin because members have different external tariffs. These rules determine whether a product qualifies for preferential treatment.

RTAs and the WTO

RTAs are allowed under WTO rules, but they are treated as exceptions to non-discrimination. For trade in goods, the main legal basis is GATT Article XXIV. For trade in services, economic integration agreements are covered under GATS Article V. For some arrangements among developing countries, the Enabling Clause is also relevant.

The basic policy logic is that RTAs should facilitate trade among members without becoming a disguised way to raise barriers against non-members.

Trade creation

Trade creation occurs when an RTA causes a country to import from a lower-cost partner instead of producing the good domestically at a higher cost.

This usually increases welfare because consumers pay lower prices and resources are used more efficiently.

Example:

Before the FTA, the country produces wheat domestically at a high cost.
After the FTA, it imports wheat from a lower-cost partner.
Domestic consumers gain from lower prices.
The economy moves toward more efficient sourcing.

Trade diversion

Trade diversion occurs when an RTA causes a country to import from a higher-cost partner instead of a lower-cost non-member.

This can reduce welfare because the agreement shifts trade away from the most efficient supplier.

Example:

Japan is the lowest-cost supplier.
Germany is a higher-cost supplier.
An FTA removes tariffs only on German goods.
The importing country switches from Japan to Germany because Germany now receives tariff preference.
The country may lose tariff revenue and buy from a less efficient source.

Trade diversion problem

An RTA may increase trade among members but still reduce welfare if the new trade replaces cheaper imports from non-members.

Welfare logic of an FTA

The welfare effect of an FTA is ambiguous.

Effect	Welfare direction
Lower consumer price	Positive for consumers.
More imports consumed	Positive if it reflects efficient trade creation.
Lost tariff revenue	Negative for government revenue.
Switching to a higher-cost partner	Negative because of trade diversion.
More competition	Potential positive dynamic effect.
Larger market	Potential positive dynamic effect.

An FTA is more likely to raise welfare when:

the partner is a low-cost supplier,
the price reduction is large,
import demand responds strongly,
the initial tariff was high,
trade creation is larger than trade diversion.

Worked example: UK compact car market

Assume the UK imports all compact cars. Quantities are measured in thousand cars and prices are measured in US dollars per car.

The UK import demand curve is:

\[ Q = 70 - 0.01P \]

where:

$Q$ is imports in thousand cars,
$P$ is the delivered price in the UK market.

The UK initially applies a tariff of 1000 dollars per car on all imports.

World prices before tariffs are:

Supplier	World price
Japan	5000
Germany	5500

With the tariff:

Supplier	Delivered price in the UK
Japan	6000
Germany	6500

Since Japan is cheaper after tariff, the UK initially imports from Japan at a price of 6000.

At $P = 6000$:

\[ Q = 70 - 0.01(6000) = 10 \]

So the UK imports 10 thousand cars.

Case A: trade diversion dominates

Now suppose the UK signs an FTA with Germany. The tariff on German cars is removed, but the tariff on Japanese cars remains.

After the FTA:

Supplier	Delivered price in the UK
Japan	6000
Germany	5500

The UK switches from Japan to Germany because German cars now enter duty free. But Japan remains the lower-cost world supplier before tariffs. This is trade diversion.

At $P = 5500$:

\[ Q = 70 - 0.01(5500) = 15 \]

So imports increase from 10 to 15 thousand cars.

Consumer surplus gain

The price falls from 6000 to 5500. The consumer surplus gain has two parts.

Rectangle on the original quantity:

\[ 500 \times 10{,}000 = 5{,}000{,}000 \]

Triangle on the extra quantity:

\[ \frac{1}{2} \times 500 \times 5{,}000 = 1{,}250{,}000 \]

Total consumer surplus gain:

\[ \Delta CS = 6{,}250{,}000 \]

Tariff revenue loss

Before the FTA, the UK collected 1000 dollars per car on 10 thousand imported cars:

\[ TR_0 = 1000 \times 10{,}000 = 10{,}000{,}000 \]

After the FTA, imports come from Germany duty free:

\[ TR_1 = 0 \]

So:

\[ \Delta TR = -10{,}000{,}000 \]

Net welfare effect

\[ \Delta W = \Delta CS + \Delta TR \]

\[ \Delta W = 6.25 - 10 = -3.75 \text{ million dollars} \]

In Case A, the FTA reduces UK welfare by 3.75 million dollars. The consumer gain is not large enough to offset the tariff revenue loss and the switch to a higher-cost partner.

Case B: trade creation dominates

Now suppose the effective partner price after the FTA is 5100. This could reflect lower partner production cost, stronger competition, or a different partner-country scenario.

At $P = 5100$:

\[ Q = 70 - 0.01(5100) = 19 \]

Imports increase from 10 to 19 thousand cars.

Consumer surplus gain

The price falls from 6000 to 5100. The price drop is 900.

Rectangle on the original quantity:

\[ 900 \times 10{,}000 = 9{,}000{,}000 \]

Triangle on the extra quantity:

\[ \frac{1}{2} \times 900 \times 9{,}000 = 4{,}050{,}000 \]

Total consumer surplus gain:

\[ \Delta CS = 13{,}050{,}000 \]

The tariff revenue loss is still 10 million dollars.

Therefore:

\[ \Delta W = 13.05 - 10 = 3.05 \text{ million dollars} \]

In Case B, the FTA raises UK welfare by 3.05 million dollars. The consumer surplus gain is large enough to dominate the tariff revenue loss.

Python application: visualizing the FTA example

Code

import numpy as np
import matplotlib.pyplot as plt

# Import demand: Q = 70 - 0.01P
P = np.linspace(4500, 6500, 200)
Q = 70 - 0.01 * P

price_initial = 6000
price_case_a = 5500
price_case_b = 5100

q_initial = 70 - 0.01 * price_initial
q_case_a = 70 - 0.01 * price_case_a
q_case_b = 70 - 0.01 * price_case_b

plt.figure()
plt.plot(Q, P, label="Import demand: Q = 70 - 0.01P")
plt.axhline(price_initial, linestyle="--", label="Before FTA: P = 6000")
plt.axhline(price_case_a, linestyle="--", label="Case A: P = 5500")
plt.axhline(price_case_b, linestyle="--", label="Case B: P = 5100")
plt.scatter([q_initial, q_case_a, q_case_b], [price_initial, price_case_a, price_case_b])
plt.text(q_initial + 0.5, price_initial, "Q=10")
plt.text(q_case_a + 0.5, price_case_a, "Q=15")
plt.text(q_case_b + 0.5, price_case_b, "Q=19")
plt.xlabel("Imports, thousand cars")
plt.ylabel("Price, dollars per car")
plt.title("FTA price effects in the UK compact car market")
plt.legend()
plt.tight_layout()
plt.show()

Figure 12.1: UK import demand and FTA price scenarios.

Code

import pandas as pd

fta_results = pd.DataFrame({
    "Scenario": ["Case A: trade diversion dominates", "Case B: trade creation dominates"],
    "Initial price": [6000, 6000],
    "New price": [5500, 5100],
    "Initial imports, thousand cars": [10, 10],
    "New imports, thousand cars": [15, 19],
    "Consumer surplus gain, million dollars": [6.25, 13.05],
    "Tariff revenue loss, million dollars": [10.00, 10.00],
    "Net welfare effect, million dollars": [-3.75, 3.05]
})

fta_results

Table 12.1

	Scenario	Initial price	New price	Initial imports, thousand cars	New imports, thousand cars	Consumer surplus gain, million dollars	Tariff revenue loss, million dollars	Net welfare effect, million dollars
0	Case A: trade diversion dominates	6000	5500	10	15	6.25	10.0	-3.75
1	Case B: trade creation dominates	6000	5100	10	19	13.05	10.0	3.05

Dynamic gains from RTAs

The static welfare calculation focuses on prices, quantities, consumer surplus, and tariff revenue. RTAs may also generate dynamic gains.

Examples include:

stronger competition,
lower production costs,
greater specialization,
technology transfer,
more foreign direct investment,
larger markets,
more reliable regional supply chains.

These gains are real possibilities, but they should not be assumed automatically. A good policy analysis should ask whether the agreement creates efficiency gains or simply reallocates trade because of preferences.

RTAs and student FTA simulations

In the course project, students use FTA simulation tools to evaluate potential agreements between country pairs. The key outputs should be interpreted through the logic of this chapter.

A good FTA simulation report should answer:

Which country pair is being studied?
Which products or sectors are most affected?
How much trade is created?
How much trade is diverted?
Which sectors gain the most?
Which non-member suppliers may lose market share?
Does the agreement look welfare-improving or mainly preferential?

Key takeaway

RTAs can improve welfare when they create new efficient trade among members. However, they can reduce welfare when they divert trade away from lower-cost non-members toward higher-cost partner countries. The welfare effect of an RTA is therefore ambiguous and must be evaluated empirically.

Review questions

What is a regional trade agreement?
Why are RTAs exceptions to the MFN principle?
What is the difference between a free trade area and a customs union?
Why do free trade areas need rules of origin?
Define trade creation.
Define trade diversion.
Why can an FTA increase trade but reduce welfare?
In the UK compact car example, why is Case A welfare-reducing?
In the UK compact car example, why is Case B welfare-improving?
What are two possible dynamic gains from RTAs?

Practice problem

A country imports all of its rice. Its import demand is:

\[ Q = 100 - 2P \]

where $Q$ is measured in thousand tons and $P$ is measured in dollars per ton.

Before an FTA, the delivered price from the lowest-cost non-member is 30. The country imports 40 thousand tons and collects tariff revenue of 200 thousand dollars.

After an FTA with a partner country, the delivered price falls to 25 and imports increase to 50 thousand tons. Imports from the partner enter duty free.

Calculate the gain in consumer surplus.
Calculate the loss in tariff revenue.
Calculate the net welfare effect.
Is this closer to trade creation or trade diversion?
What extra information would you need to make a stronger conclusion?

Selected official sources

WTO. GATT Article XXIV on customs unions and free-trade areas.
https://www.wto.org/english/tratop_e/region_e/region_art24_e.htm
WTO. Briefing note on regional trade agreements.
https://www.wto.org/english/thewto_e/minist_e/mc10_e/briefing_notes_e/brief_rta_e.htm
WTO. Preferential trade agreements, trade creation and trade diversion.
https://www.wto.org/english/res_e/publications_e/wtr11_forum_e/wtr11_12july11_bis_e.htm

--- title: "08. Regional Trade Agreements" --- ## Learning objectives By the end of this chapter, you should be able to: 1. Define regional trade agreements. 2. Explain why RTAs are an exception to the MFN principle. 3. Distinguish between preferential trade areas, free trade areas, customs unions, common markets, and economic unions. 4. Explain trade creation and trade diversion. 5. Calculate the welfare effect of an FTA using a simple import-demand example. 6. Interpret TINA-style FTA simulation results in terms of trade creation and trade diversion. ## Why this chapter matters Regional trade agreements are common in the world economy. They can reduce trade barriers among members, increase market access, and support regional integration. However, RTAs are also discriminatory because they give better treatment to members than to non-members. This creates a central policy question: :::: {.callout-important} ## Key question Does an RTA create new efficient trade, or does it divert trade away from lower-cost suppliers outside the agreement? :::: This question is especially important in agricultural trade because tariffs, standards, transport costs, and regional supply chains strongly affect food markets. ## What is a regional trade agreement? A **regional trade agreement**, or **RTA**, is a trade agreement between two or more countries that gives preferential market access to members of the agreement. RTAs may reduce or eliminate tariffs, coordinate customs procedures, harmonize standards, or deepen economic cooperation. RTAs are exceptions to the WTO most-favoured-nation principle. Under MFN, a WTO member should normally treat all WTO partners equally. Under an RTA, members give each other preferential treatment that is not automatically extended to non-members. ## Why do countries form RTAs? Countries form RTAs for several reasons. | Reason | Explanation | |---|---| | Market access | Firms gain easier access to partner-country markets. | | Economies of scale | Larger markets allow firms to expand production. | | Specialization | Members may specialize according to comparative advantage. | | Investment attraction | Larger integrated markets may attract foreign direct investment. | | Supply chains | Regional inputs and production networks may become easier to organize. | | Political cooperation | RTAs may support diplomatic, security, or regional development goals. | | Slow multilateral negotiations | Regional agreements may be easier to negotiate than global agreements. | ## Forms of regional integration Regional integration can take several forms. | Form | Main feature | Example logic | |---|---|---| | Preferential trade area | Members reduce some trade barriers among themselves. | Partial tariff preferences. | | Free trade area | Members remove most internal trade barriers but keep their own external tariffs. | Country A and B trade freely, but each has its own tariff toward Country C. | | Customs union | Members remove internal barriers and adopt a common external tariff. | Members act together toward non-members. | | Common market | Customs union plus free movement of factors of production. | Labor and capital can move more freely. | | Economic union | Common market plus deeper policy coordination. | Members coordinate broader economic policies. | A free trade area requires **rules of origin** because members have different external tariffs. These rules determine whether a product qualifies for preferential treatment. ## RTAs and the WTO RTAs are allowed under WTO rules, but they are treated as exceptions to non-discrimination. For trade in goods, the main legal basis is GATT Article XXIV. For trade in services, economic integration agreements are covered under GATS Article V. For some arrangements among developing countries, the Enabling Clause is also relevant. The basic policy logic is that RTAs should facilitate trade among members without becoming a disguised way to raise barriers against non-members. ## Trade creation **Trade creation** occurs when an RTA causes a country to import from a lower-cost partner instead of producing the good domestically at a higher cost. This usually increases welfare because consumers pay lower prices and resources are used more efficiently. Example: - Before the FTA, the country produces wheat domestically at a high cost. - After the FTA, it imports wheat from a lower-cost partner. - Domestic consumers gain from lower prices. - The economy moves toward more efficient sourcing. ## Trade diversion **Trade diversion** occurs when an RTA causes a country to import from a higher-cost partner instead of a lower-cost non-member. This can reduce welfare because the agreement shifts trade away from the most efficient supplier. Example: - Japan is the lowest-cost supplier. - Germany is a higher-cost supplier. - An FTA removes tariffs only on German goods. - The importing country switches from Japan to Germany because Germany now receives tariff preference. - The country may lose tariff revenue and buy from a less efficient source. :::: {.callout-warning} ## Trade diversion problem An RTA may increase trade among members but still reduce welfare if the new trade replaces cheaper imports from non-members. :::: ## Welfare logic of an FTA The welfare effect of an FTA is ambiguous. | Effect | Welfare direction | |---|---| | Lower consumer price | Positive for consumers. | | More imports consumed | Positive if it reflects efficient trade creation. | | Lost tariff revenue | Negative for government revenue. | | Switching to a higher-cost partner | Negative because of trade diversion. | | More competition | Potential positive dynamic effect. | | Larger market | Potential positive dynamic effect. | An FTA is more likely to raise welfare when: - the partner is a low-cost supplier, - the price reduction is large, - import demand responds strongly, - the initial tariff was high, - trade creation is larger than trade diversion. ## Worked example: UK compact car market Assume the UK imports all compact cars. Quantities are measured in thousand cars and prices are measured in US dollars per car. The UK import demand curve is: $$ Q = 70 - 0.01P $$ where: - $Q$ is imports in thousand cars, - $P$ is the delivered price in the UK market. The UK initially applies a tariff of 1000 dollars per car on all imports. World prices before tariffs are: | Supplier | World price | |---|---:| | Japan | 5000 | | Germany | 5500 | With the tariff: | Supplier | Delivered price in the UK | |---|---:| | Japan | 6000 | | Germany | 6500 | Since Japan is cheaper after tariff, the UK initially imports from Japan at a price of 6000. At $P = 6000$: $$ Q = 70 - 0.01(6000) = 10 $$ So the UK imports 10 thousand cars. ## Case A: trade diversion dominates Now suppose the UK signs an FTA with Germany. The tariff on German cars is removed, but the tariff on Japanese cars remains. After the FTA: | Supplier | Delivered price in the UK | |---|---:| | Japan | 6000 | | Germany | 5500 | The UK switches from Japan to Germany because German cars now enter duty free. But Japan remains the lower-cost world supplier before tariffs. This is trade diversion. At $P = 5500$: $$ Q = 70 - 0.01(5500) = 15 $$ So imports increase from 10 to 15 thousand cars. ### Consumer surplus gain The price falls from 6000 to 5500. The consumer surplus gain has two parts. Rectangle on the original quantity: $$ 500 \times 10{,}000 = 5{,}000{,}000 $$ Triangle on the extra quantity: $$ \frac{1}{2} \times 500 \times 5{,}000 = 1{,}250{,}000 $$ Total consumer surplus gain: $$ \Delta CS = 6{,}250{,}000 $$ ### Tariff revenue loss Before the FTA, the UK collected 1000 dollars per car on 10 thousand imported cars: $$ TR_0 = 1000 \times 10{,}000 = 10{,}000{,}000 $$ After the FTA, imports come from Germany duty free: $$ TR_1 = 0 $$ So: $$ \Delta TR = -10{,}000{,}000 $$ ### Net welfare effect $$ \Delta W = \Delta CS + \Delta TR $$ $$ \Delta W = 6.25 - 10 = -3.75 \text{ million dollars} $$ In Case A, the FTA reduces UK welfare by 3.75 million dollars. The consumer gain is not large enough to offset the tariff revenue loss and the switch to a higher-cost partner. ## Case B: trade creation dominates Now suppose the effective partner price after the FTA is 5100. This could reflect lower partner production cost, stronger competition, or a different partner-country scenario. At $P = 5100$: $$ Q = 70 - 0.01(5100) = 19 $$ Imports increase from 10 to 19 thousand cars. ### Consumer surplus gain The price falls from 6000 to 5100. The price drop is 900. Rectangle on the original quantity: $$ 900 \times 10{,}000 = 9{,}000{,}000 $$ Triangle on the extra quantity: $$ \frac{1}{2} \times 900 \times 9{,}000 = 4{,}050{,}000 $$ Total consumer surplus gain: $$ \Delta CS = 13{,}050{,}000 $$ The tariff revenue loss is still 10 million dollars. Therefore: $$ \Delta W = 13.05 - 10 = 3.05 \text{ million dollars} $$ In Case B, the FTA raises UK welfare by 3.05 million dollars. The consumer surplus gain is large enough to dominate the tariff revenue loss. ## Python application: visualizing the FTA example ```{python} #| label: fig-fta-import-demand #| fig-cap: "UK import demand and FTA price scenarios." #| fig-width: 7 #| fig-height: 5 #| echo: true import numpy as np import matplotlib.pyplot as plt # Import demand: Q = 70 - 0.01P P = np.linspace(4500, 6500, 200) Q = 70 - 0.01 * P price_initial = 6000 price_case_a = 5500 price_case_b = 5100 q_initial = 70 - 0.01 * price_initial q_case_a = 70 - 0.01 * price_case_a q_case_b = 70 - 0.01 * price_case_b plt.figure() plt.plot(Q, P, label="Import demand: Q = 70 - 0.01P") plt.axhline(price_initial, linestyle="--", label="Before FTA: P = 6000") plt.axhline(price_case_a, linestyle="--", label="Case A: P = 5500") plt.axhline(price_case_b, linestyle="--", label="Case B: P = 5100") plt.scatter([q_initial, q_case_a, q_case_b], [price_initial, price_case_a, price_case_b]) plt.text(q_initial + 0.5, price_initial, "Q=10") plt.text(q_case_a + 0.5, price_case_a, "Q=15") plt.text(q_case_b + 0.5, price_case_b, "Q=19") plt.xlabel("Imports, thousand cars") plt.ylabel("Price, dollars per car") plt.title("FTA price effects in the UK compact car market") plt.legend() plt.tight_layout() plt.show() ``` ```{python} #| label: tbl-fta-welfare #| echo: true import pandas as pd fta_results = pd.DataFrame({ "Scenario": ["Case A: trade diversion dominates", "Case B: trade creation dominates"], "Initial price": [6000, 6000], "New price": [5500, 5100], "Initial imports, thousand cars": [10, 10], "New imports, thousand cars": [15, 19], "Consumer surplus gain, million dollars": [6.25, 13.05], "Tariff revenue loss, million dollars": [10.00, 10.00], "Net welfare effect, million dollars": [-3.75, 3.05] }) fta_results ``` ## Dynamic gains from RTAs The static welfare calculation focuses on prices, quantities, consumer surplus, and tariff revenue. RTAs may also generate dynamic gains. Examples include: - stronger competition, - lower production costs, - greater specialization, - technology transfer, - more foreign direct investment, - larger markets, - more reliable regional supply chains. These gains are real possibilities, but they should not be assumed automatically. A good policy analysis should ask whether the agreement creates efficiency gains or simply reallocates trade because of preferences. ## RTAs and student FTA simulations In the course project, students use FTA simulation tools to evaluate potential agreements between country pairs. The key outputs should be interpreted through the logic of this chapter. A good FTA simulation report should answer: 1. Which country pair is being studied? 2. Which products or sectors are most affected? 3. How much trade is created? 4. How much trade is diverted? 5. Which sectors gain the most? 6. Which non-member suppliers may lose market share? 7. Does the agreement look welfare-improving or mainly preferential? ## Key takeaway RTAs can improve welfare when they create new efficient trade among members. However, they can reduce welfare when they divert trade away from lower-cost non-members toward higher-cost partner countries. The welfare effect of an RTA is therefore ambiguous and must be evaluated empirically. ## Review questions 1. What is a regional trade agreement? 2. Why are RTAs exceptions to the MFN principle? 3. What is the difference between a free trade area and a customs union? 4. Why do free trade areas need rules of origin? 5. Define trade creation. 6. Define trade diversion. 7. Why can an FTA increase trade but reduce welfare? 8. In the UK compact car example, why is Case A welfare-reducing? 9. In the UK compact car example, why is Case B welfare-improving? 10. What are two possible dynamic gains from RTAs? ## Practice problem A country imports all of its rice. Its import demand is: $$ Q = 100 - 2P $$ where $Q$ is measured in thousand tons and $P$ is measured in dollars per ton. Before an FTA, the delivered price from the lowest-cost non-member is 30. The country imports 40 thousand tons and collects tariff revenue of 200 thousand dollars. After an FTA with a partner country, the delivered price falls to 25 and imports increase to 50 thousand tons. Imports from the partner enter duty free. 1. Calculate the gain in consumer surplus. 2. Calculate the loss in tariff revenue. 3. Calculate the net welfare effect. 4. Is this closer to trade creation or trade diversion? 5. What extra information would you need to make a stronger conclusion? ## Selected official sources - WTO. GATT Article XXIV on customs unions and free-trade areas. <https://www.wto.org/english/tratop_e/region_e/region_art24_e.htm> - WTO. Briefing note on regional trade agreements. <https://www.wto.org/english/thewto_e/minist_e/mc10_e/briefing_notes_e/brief_rta_e.htm> - WTO. Preferential trade agreements, trade creation and trade diversion. <https://www.wto.org/english/res_e/publications_e/wtr11_forum_e/wtr11_12july11_bis_e.htm>