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Even if all countries benefit from a free trade area, they do not necessarily all benefit to the same degree. Compensatory mechanisms are used to transfer some of the gains from regional trade liberalisation to those countries that benefit less from the new arrangements. The issue of compensation can become politically important in the negotiation of regional trade agreements, especially in the situation where one economy dominates, as in Southern Africa.
KeywordsEuropean Union Regional Trade Custom Union Free Trade Area Trade Diversion
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