In theory, free trade should push prices together as competition forces high-cost producers to lower their prices. Studies show, however, that large divergences in price often persist for long periods. Laptop computers and Levi's jeans, for example, are consistently cheaper in America than in Europe or Japan. This reflects a variety of factors, including tastes, transport costs, differences in taxes and inefficient distribution networks. But some of the difference is due to the persistence of import barriers.
Product markets are still nowhere near as integrated across borders as they are within nations.
Consider the example of trade between the United States and Canada, one of the least restricted trading borders in the world. On average, trade between a Canadian province and an American state is 20 times smaller than domestic trade between two Canadian provinces, after adjusting for distance and income levels. For all the talk about a single market, the Canadian and American markets remain substantially segmented from one another. For other countries this is truer still. The financial markets are not yet truly integrated either.