Chile’s Regional Arrangements: the Importance of Market Access and Lowering the Tariff to Six Percent
AbstractUsing a multi-sector multi-country computable general equilibrium model, we examine Chile’s “additive regionalism” strategy of negotiating bilateral free trade agreements with all of its significant trading partners. Chile’s agreements with “Northern” partners provide sufficient market access to overcome trade diversion costs for Chile. By lowering its tariff from eleven to six percent, Chile is able to reduce trade diversion from all its regional agreements. This converts MERCOSUR from a negative to a positive agreement. Due to preferential market access, additive regionalism is likely to provide Chile with gains that are many multiples of the static welfare gains from unilateral free trade. We find that at least one partner country loses from each of the regional agreements we consider, and excluded countries as a group always lose. Gains to the world from global free trade are estimated to be vastly larger than any of the regional arrangements.
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Bibliographic InfoPaper provided by Central Bank of Chile in its series Working Papers Central Bank of Chile with number 238.
Date of creation: Nov 2003
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- Glenn W. Harrison & Thomas F. Rutherford & David G. Tarr, 2005. "Chile´s Regional Arrangements: The Importance of Market Access and Lowering the Tariff to Six Percent," Central Banking, Analysis, and Economic Policies Book Series, in: Rómulo A. Chumacero & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel ( (ed.), General Equilibrium Models for the Chilean Economy, edition 1, volume 9, chapter 9, pages 303-344 Central Bank of Chile.
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