Free trade agreements without delocation

Small nations fear that FTAs with larger, richer nations will erode their i ndustrial bases. These concerns are recognized in FTA and multilateral talk s: small nations may explicitly or implicitly maintain higher trade barrier s. Using a model where symmetric liberalization de-industrializes small, po or nations, we characterize the path of protection-asymmetries that allow l iberalization without delocation. In welfare terms, the large nation prefer s this no-delocation liberalization scheme only when barriers are sufficien tly high; the small nation's ranking is reversed. An anti-delocation scheme involving international income transfers is also evaluated and found infea sible.