REGIONALISM AND THE REST OF THE WORLD: THE IRRELEVANCE OF THE KEMP-WAN THEOREM

Many commentators purport to use the Kemp-Wan Theorem to discuss the effects of regional integration schemes on non-member countries, and to operationalize the theorem in terms of the share of member countries' imports coming from non-members. I show that Kemp and Wan say nothing about changes in non-member welfare and that the latter is more closely related to non-members' imports than to their shares of members' markets. I suggest that a new approach to this issue is required.