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

Author

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  • Hugo Rojas-Romagosa

    () (CPB Netherlands Bureau for Economic Policy Analysis)

  • 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.

Suggested Citation

  • Hugo Rojas-Romagosa & J.F. Francois & L. Rivera, 2008. "Economic perspectives for Central America after CAFTA; a GTAP-based analysis," CPB Discussion Paper 99, CPB Netherlands Bureau for Economic Policy Analysis.
  • Handle: RePEc:cpb:discus:99
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    Citations

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    Cited by:

    1. Hugo ROJAS-ROMAGOSA & Luis RIVERA, "undated". "Human Capital Formation and the Linkage between Trade and Poverty: The Cases of Costa Rica and Nicaragua," EcoMod2010 259600142, EcoMod.
    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. 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.
    4. Moreno ROMA & Paul HIEBERT, "undated". "Relative House Price Dynamics Across Euro Area and US Cities: Convergence or Divergence?," EcoMod2010 259600143, EcoMod.
    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.

    More about this item

    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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