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Economic perspectives for Central America after CAFTA

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Author Info
Joseph F. Francois
Luis Rivera
Hugo Rojas-Romagosa ()

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Abstract

Using a GTAP CGE application, we assess the main economic results of CAFTA for Central America (CA). Currently, Central America enjoys preferential access to the US market through the Caribbean Basin Initiative (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 in the textile and apparel sectors. CAFTA will balance for this new source of competition by allowing better access for CA textiles and apparel products, while creating large opportunities for labour market improvements and FDI inflows to Central America. If these opportunities are exploited, the region has much to gain from CAFTA. However, we also find a strong sectoral readjustment from agricultural sectors to maquila-based industries, which could create important adjustment strains.

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File URL: http://www.cpb.nl/eng/pub/cpbreeksen/discussie/99/disc99.pdf
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Paper provided by CPB Netherlands Bureau for Economic Policy Analysis in its series CPB Discussion Papers with number 99.

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Date of creation: Feb 2008
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Handle: RePEc:cpb:discus:99

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Related research
Keywords: Free trade agreements CGE models GTAP applications

Find related papers by JEL classification:
F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
C68 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Computable General Equilibrium Models

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This page was last updated on 2008-5-1.


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