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Economic perspectives for Central America after CAFTA; a GTAP-based analysis

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  • Hugo Rojas-Romagosa

    ()

  • J.F. Francois
  • L. Rivera

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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Bibliographic Info

Paper provided by CPB Netherlands Bureau for Economic Policy Analysis in its series CPB Discussion Paper 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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Cited by:
  1. Timothy J. Kehoe & Jack Rossbach & Kim J. Ruhl, 2013. "Using the new products margin to predict the industry-level impact of trade reform," Staff Report 492, Federal Reserve Bank of Minneapolis.
  2. Bussolo, Maurizio & Niimi, Yoko, 2006. "Do regional trade pacts benefit the poor ? An illustration from the Dominican Republic-Central American Free Trade Agreement in Nicaragua," Policy Research Working Paper Series 3850, The World Bank.
  3. 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.

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