The article explores the effects of Preferential Trade Agreements (PTAs) like Customs Unions (CUs) and Free Trade Areas (FTAs) using a model based on comparative advantage. FTAs are better for overall welfare than CUs, benefiting both member and nonmember countries. Nonmember countries can gain more from FTAs than member countries, while CUs benefit members more. The volume of trade plays a big role in the welfare changes for both types of PTAs. When countries have different resources, the volume of trade effect becomes more important. Lack of policy coordination in FTAs can lead to welfare losses, while CUs can lead to significant welfare gains due to joint tariff decisions.