Regional Trade Agreements: The mainstream approach and an alternative treatment Esteban Pérez Caldentey and Anesa Ali

The principle of comparative advantage is the fundamental explanation for the gains from trade argument in mainstream trade theory. This paper argues that its underlying assumptions make the entire free trade argument prey to the ‘ignoratio elenchi’ fallacy. The authors present an alternative framework to analyse RTAs, which is based on three approaches to economic growth: cumulative causation, the technological gap approach and the balance-of-payments constraint growth approach. According to this model, there is no mechanism that guarantees the optimality of free trade, convergence between countries, or in fact that ensures a known outcome.

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