This paper deals with the problem of assessing the net effect of economic integration on the welfare of the populations of the countries concerned. Viner's pioneering work in 195 concluded that any economic integration necessarily creates a trade creation effect and a trade diversion effect, but this assessment was ambiguous. In fact, the obligatory and concomitant existence of trade creation and trade diversion effects means that it is no longer possible to accurately determine the net effects of economic integration on the welfare of the populations of the countries concerned without first accurately assessing these effects, which can only be done ex-post. Resolving this problem of ambiguity therefore appears to be a major problem for theorists and practitioners of economic integration. We establish that the effect of creating and diverting trade flows does not play a role in assessing the net welfare effect of economic/trade integration. Our conclusion is that neither Jacob Viner's conclusion in 1950 nor Krugman's in 1991 is well-founded.

Key Words: Economic integration - Traffic creation - Traffic diversion - Net welfare effect - Trade policy.

JEL Classification: F02; F13; F15.

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