This note introduces the USITC's Latin American regional, computable general equilibrium model, which combines flexible functional form modeling with dynamic analysis. It describes the rationale for experimenting with income elasticities of demand and substitution elasticities in the context of Western Hemisphere trade, and presents some results from experiments with U.S.-Chile trade liberalization. The liberalization of trade between Chile and NAFTA will have an appreciable impact on Chile-NAFTA trade. Welfare gains will accrue primarily to Chile, leaving the welfare of MERCOSUR's two largest economies unaffected. The paper describes the methodology of identifying the dynamic gains that should accrue from the elimination of trade barriers in the Americas. Trade externalities, which boost Latin American productivity, will be especially advantageous to Argentina.
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Article provided by Instituto de Economía. Pontificia Universidad Católica de Chile. in its journal Cuadernos de Economía.
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