Abstract
The welfare consequence of Britain's entry into the Common Market is studied for 1972–1980. The figures show that in some years Britain would have been better off, by 3–4 percent of GDP, trading on its own. Its average losses were greater than 1.5 percent of GDP. Moreover, a feasible alternative arrangement is described in which Common Market association would benefit both Great Britain and other Common Market countries without harming non-Common Market countries. The methodology involves a general equilibrium model of customs union formation which determines financial arrangements such as cross-country compensation and the distribution of common tariff revenues. Obviously, similar studies can be done for other applications such as the proposed North Atlantic Free Trade Area.
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