Partners to a preferential trade agreement: implications of varying size

Most often, the theory of preferential trade agreements assumes a 'small' home country, and a 'large' partner. In this paper, the welfare implications of a small trading partner are examined. A distinction is found between two ranges of size: a country may be just 'small', or be 'ultra-small'. Conventional propositions about the likelihood of a gain or a loss from entering into a preferential agreement would still hold when the partner is 'small'; whereas some of them would have to be reversed when the partner is an 'ultra-small' economy.