We develop a model in which it is uncertainty about the future domestic policy environment that both makes international cooperation attractive and induces the possibility of a nation reneging on such an international agreement. We show, in a fairly general setting in which the likelihood of...

Purpose – This chapter suggests that the value of the extension to free trade areas (FTAs) of the Kemp–Wan (KW) theorem on necessarily welfare-improving customs unions is undermined by its very rationale – the greater popularity of FTAs over customs unions for ‘political’ reasons....