On free trade networks and industrial location

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In this study, I propose a novel framework that can consider the formation of free trade agreements (FTA networks) and industrial location patterns. I formulate a multi-countries monopolistic competition model to specify the industrial location pattern which appears on a given FTA network, and then I examine 1) countries' incentive to sign FTA and 2) pairwise stability of FTA networks. I declare that the complete FTA network is not always the unique stable network. When transportation cost is low, trade integration makes industry excessively agglomerated in more trade open countries and less trade open countries' incentive to sign FTA decreases. Due to the effect, FTAs might be "stumbling blocks" to global free trade.