REGIONAL FREE-TRADE AND SOCIAL INTEGRATION

This paper analyzes recent free trade arrangements from a positive pol itical economy perspective. In contrast to most other literature which fails to take into account geographical factors it is argued here tha t proximity and transportation costs play an important role in trade a rrangements. Another important also largely neglected factor is the de gree of social cohesion in terms of labor standards among potential tr ading partners. A political support maximizing government will conside r these factors when balancing political support from free traders and protectionists.