Despite the well-known gains from trade, trade liberalization is politically one of the most contentious actions that a government can take. We propose and formalize a new argument, having to do with uncertainty, which is complementary to the usual explanations for why that is the case: many...

Regional integration is on the rise again, despite its apparent failure among developing countries in the past. The paper first surveys the ambiguous economics of customs unions. We emphasize that the traditional dichotomy between `trade creation' and `trade diversion' is not particularly...