Discussion of Alan V Deardorff, 'The effects of trade liberalization on the members of a trading bloc: a lumpy country analysis'

This is a very stimulating paper and also a very readable one. Alan Deardorff takes a complex model and makes it accessible to a wide audience. In its focus on sub-national geographical entities (regions of a country, countries in a union), it is a close relation of the new economic geography, but it uses only neoclassical tools; in particular, it is rooted in the tradition of perfect competition. The basic idea is that, if at least one of two regions in a country lies outside the cone of diversification, national trade liberalization will have different effects in different regions. One of the nice features of the model is that lying outside the cone is not a matter of mere coincidence, but can actually be induced by distortions in the initial, pre-liberalization, conditions.