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Scenarios For Trade Integration In The Americas

Author

Listed:
  • Diao, Xinshen
  • Diaz-Bonilla, Eugenio
  • Robinson, Sherman

Abstract

This paper analyzes two potential trade liberalization scenarios – a Free Trade Area of the Americas (FTAA) and possible links between MERCOSUR and the European Union (EU) – in a world computable general equilibrium (CGE) model. The model also incorporates some macro elements such as a cash- in-advance mechanism and rigidities in wages and exchange rates. The empirical results show that the two alternative regional integration scenarios are good for the participants while have little impact on the nonparticipants. Both scenarios are net trade creating, as trade creation greatly exceeds trade diversion, and the trade-diversion has relatively minor effects on the affected regions. The gains are larger for the Latin American participants than for their large potential partners – the U.S. and EU. These results are consistent with earlier studies of NAFTA, which also predicted small positive gains for the U.S. and large gains for Mexico. Many countries in Latin America are currently undergoing macroeconomic strains, and growth in the region has slowed. In this environment, external shocks and stabilization and structural adjustment programs are likely to lead to significant swings in trade balances and exchange rates. These issues will have to be considered in acknowledging that it is hard to reap the long-term benefits of trade liberalization in an environment of macroeconomic instability.

Suggested Citation

  • Diao, Xinshen & Diaz-Bonilla, Eugenio & Robinson, Sherman, 2002. "Scenarios For Trade Integration In The Americas," TMD Discussion Papers 16281, CGIAR, International Food Policy Research Institute (IFPRI).
    • Handle: RePEc:ags:iffp23:16281
    DOI: 10.22004/ag.econ.16281
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    References listed on IDEAS

    as
    1. Xinshen Diao, 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.
    2. Lewis, Jeffrey D. & Robinson, Sherman & Wang, Zhi, 1995. "Beyond the Uruguay Round: The implications of an Asian free trade area," China Economic Review, Elsevier, vol. 6(1), pages 35-90.
    3. Robinson, Sherman & Thierfelder, Karen, 1999. "Trade liberalization and regional integration: the search for large numbers," TMD Discussion Papers 97554, CGIAR, International Food Policy Research Institute (IFPRI).
    4. Robinson, Sherman & Thierfelder, Karen, 2002. "Trade liberalisation and regional integration: the search for large numbers," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 46(4), pages 1-20.
    5. Machado, Roberto & Morley, Samuel A. & Pettinato, Stefano, 1999. "Indexes of structural reform in Latin America," Series Históricas 7453, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    6. Unknown, 1998. "Regional Trade Agreements and U.S. Agriculture," Agricultural Information Bulletins 33661, United States Department of Agriculture, Economic Research Service.
    7. Cattaneo, Andrea & Diaz-Bonilla, Eugenio & Robinson, Sherman & Thomas, Marcelle, 2000. "Food security and trade negotiations in the World Trade Organization: a cluster analysis of country groups," TMD discussion papers 59, International Food Policy Research Institute (IFPRI).
    8. Marcus Noland & Li-Gang Liu & Sherman Robinson, 1998. "Global Economic Effects of the Asian Currency Devaluations," Peterson Institute Press: All Books, Peterson Institute for International Economics, number pa56, October.
    9. Diaz-Bonilla, Eugenio & Thomas, Marcelle & Robinson, Sherman & Cattaneo, Andrea, 2000. "Food Security And Trade Negotiations In The World Trade Organization: A Cluster Analysis Of Country Groups," TMD Discussion Papers 16261, CGIAR, International Food Policy Research Institute (IFPRI).
    10. Mary E. Burfisher & Sherman Robinson & Karen Thierfelder, 2001. "The Impact of NAFTA on the United States," Journal of Economic Perspectives, American Economic Association, vol. 15(1), pages 125-144, Winter.
    11. Unknown, 1998. "Regional Trade Agreements and U.S. Agriculture," Agricultural Economic Reports 33979, United States Department of Agriculture, Economic Research Service.
    12. Fischer, Stanley, 1974. "Money and the Production Function," Economic Inquiry, Western Economic Association International, vol. 12(4), pages 517-533, December.
    13. Hinojosa-Ojeda, Raul A. & Robinson, Sherman & Lewis, Jeffrey D., 1995. "Regional integration options for Central America and the Caribbean after NAFTA," The North American Journal of Economics and Finance, Elsevier, vol. 6(2), pages 121-148.
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    Cited by:

    1. Morley, Samuel A. & Pineiro, Valeria, 2004. "The Effect Of Wto And Ftaa On Agriculture And The Rural Sector In Latin America," DSGD Discussion Papers 16171, CGIAR, International Food Policy Research Institute (IFPRI).

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