Why are trade agreements regional? I address this question in a model of oligopoly featuring\ud product variety. Tarifs have the effect of manipulating a country's terms of trade and shifting profits\ud towards the domestic market at the expense of foreign trade partners. Countries endogenously form\ud into regional trade agreements or global free trade in a framework where any agreement must be\ud sustained by repeated interaction. A crucial parameter determining the degree of regionalism is\ud product variety. I demonstrate that for a given trade cost and discount factor, increases in product\ud variety leads to greater scope for global free trade relative to regional trade agreements.