In this paper, we study market liberalization in an imperfectly competitive environment in
the presence of price effects. For this purpose, we build a three-country model of international
trade under monopolistic competition with endogenous prices and wages. The neighboring
effect translates how the size effect propagates across countries. When some country increases
in size, its nominal wage increases, as well as that in a small and near country, while that in
a large and distant country falls. We also show that a preferential trade agreement increases
the relative wage, the welfare, and the terms-of-trade in the partner countries, where the
integration effect dominates, while it lowers those in the third country.