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A Dynamic Evaluation of the Effects of A Free Trade Area of the Americas -An Intertemporal, Global General Equilibrium Model

Author

Listed:
  • Diao, Xinshen

    (International Food Policy Research Institute)

Abstract

This study examines the dynamic effects of a Free Trade Area of the Americas (FTAA) on the countries within the Western Hemisphere. The analysis uses an intertemporal, global, multi-sector general equilibrium model which takes into account changes in saving-investment, capital accumulation, and the linkages between openness in trade and economic growth. The study finds that the developing countries in the hemisphere may not enjoy welfare gain from an FTAA if they trade more with non-hemisphere countries and if trade-diverting effects dominate trade-creating effects. Taking into account the total factor productivity (TFP)-trade linkages, however, all developing countries in the region would benefit from an FTAA. The direct effects of an FTAA on the U.S. and Canada are modest, while the indirect effects of an FTAA, i.e., the effects on U.S. and Canadian firms to invest in their neighboring countries, are strong.

Suggested Citation

  • Diao, Xinshen, 2001. "A Dynamic Evaluation of the Effects of A Free Trade Area of the Americas -An Intertemporal, Global General Equilibrium Model," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 16, pages 21-47.
    • Handle: RePEc:ris:integr:0152
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    Citations

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    Cited by:

    1. Hertel, Thomas & Hummels, David & Ivanic, Maros & Keeney, Roman, 2007. "How confident can we be of CGE-based assessments of Free Trade Agreements?," Economic Modelling, Elsevier, vol. 24(4), pages 611-635, July.
    2. Francois, J. & Rojas-Romagosa, H., 2004. "Trade Policy and the Household Distribution of Income," Conference papers 331245, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    3. Sabine Mage-Bertomeu, 2006. "Les modèles d'équilibre général appliqués à la politique commerciale : développements récents," Revue d'économie politique, Dalloz, vol. 116(3), pages 357-381.
    4. De Miguel, Carlos J. & Durán Lima, José Elías & Schuschny, Andrés Ricardo, 2007. "Trade agreements by Colombia, Ecuador and Peru with the United States: effects on trade, production and welfare," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), April.
    5. van Meijl, H. & van Rheenen, T. & Tabeau, A. & Eickhout, B., 2005. "Modeling Shifts in Agricultural Land as a Consequence of Different Agricultural Policies," Conference papers 331351, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.

    More about this item

    Keywords

    FTAA; Global Dynamic Applied General Equilibrium; Trade; Trade Bloc;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General

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