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Economic Perspectives for Central America after CAFTA: A GTAP-based Analysis

Author

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  • Francois, Joseph F.
  • Rivera, Luis
  • Rojas-Romagosa, Hugo

Abstract

Using a GTAP CGE application we assess the main economic results of CAFTA for Central America (CA). Currently CA enjoys preferential access to the US market through the CBI. CAFTA will consolidate and augment these concessions. Meanwhile, the agreement requires widespread opening of CA markets to US imports over time. The implementation of the ATC protocol in 2005 implies increased Chinese competition for the region. Thus, CAFTA will balance for this new source of competition in the textile and apparel sectors, while creating large opportunities for labor market improvements and FDI inflows to CA. If these opportunities are exploited, the region has much to gain from CAFTA. However, we also find a strong sectoral readjustment of resources from agricultural sectors to maquila-based industries, which could create important adjustment strains.

Suggested Citation

  • Francois, Joseph F. & Rivera, Luis & Rojas-Romagosa, Hugo, 2006. "Economic Perspectives for Central America after CAFTA: A GTAP-based Analysis," Conference papers 331546, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    • Handle: RePEc:ags:pugtwp:331546
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    File URL: https://ageconsearch.umn.edu/record/331546/files/2572.pdf
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    Cited by:

    1. Bussolo, Maurizio & Niimi, Yoko, 2009. "Do Regional Trade Pacts Benefit the Poor? An Illustration from Dominican Republic--Central American Free Trade Agreement in Nicaragua," World Development, Elsevier, vol. 37(1), pages 146-160, January.
    2. Nelson B. Villoria, 2009. "China and the Manufacturing Terms-of-Trade of African Exporters," Journal of African Economies, Centre for the Study of African Economies, vol. 18(5), pages 781-823, November.
    3. Moreno ROMA & Paul HIEBERT, 2010. "Relative House Price Dynamics Across Euro Area and US Cities: Convergence or Divergence?," EcoMod2010 259600143, EcoMod.
    4. Rivera, Luis & Rojas-Romagosa, Hugo, 2010. "Human capital formation and the linkage between trade and poverty: the cases of Costa Rica and Nicaragua," Documentos de Proyectos 3785, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    5. Kim Ruhl & Jack Rossbach & Timothy Kehoe, 2013. "Using the New Products Margin to Predict the Sectoral Impact of Trade Reform," 2013 Meeting Papers 1227, Society for Economic Dynamics.
    6. Estrades, Carmen & Traore, Fousseini & Djiofack Zebaze, Calvin & Cardozo, Adriana, 2015. "DR-CAFTA Agreement and liberalization of trade in services: Evidence from Costa Rica," Conference papers 332581, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    7. Kehoe, Timothy J. & Rossbach, Jack & Ruhl, Kim J., 2015. "Using the new products margin to predict the industry-level impact of trade reform," Journal of International Economics, Elsevier, vol. 96(2), pages 289-297.

    More about this item

    Keywords

    International Relations/Trade; Research Methods/ Statistical Methods;

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models

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