INTRODUCTIONThe present study deals with the effect of free trade on the flow of goods across national boundaries. We discuss one of the most potent cross border networks, that is, regional economic integration. Regionalism and Multilateralism represent competing, but not mutually exclusive, principles supporting economic integration and trade in the global economy. The net results of this competition are two potentially complementary and spatial processes of trade bloc and globalization (Michalak,1997). And on the other hand regionalism fosters regional cooperation without discriminating against key trading partners outside the region. Although trade has grown rapidly in recent years, regional trade has risen relative to world trade in many parts of the globe (Arndt, 2007). In some parts of the world, these developments have been facilitated by regional free trade agreements. In East Asia, for example, both exports and imports have grown at a much faster rate within the region as compared to the worldwide growth.
For the countries within NAFTA, intra-regional manufacturing exports have shown particularly robust growth as well. Thus the very factors which are considered to hamper free trade may finally be developing it.
As stated by Hammond and Grosse (2003) Globalization or internationalization is the definitely the buzzword of the 2000s. It is often defined as one of the most significant trends of our time, with far reaching consequences for mankind. The concept of globalization becomes more significant with the increase of trade between the markets of different nations. Economists have long stated the benefits of free trade and its core influences are as convincing today as they were when Adam Smith set them out over two centuries ago.(Sally 2005).
The theories given by Ricardo (1967) emphasized on free trade and suggested that a nation should trade with other nations on the basis of comparative advantage between the...