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Economic Implications of an Association Agreement between the European Union and Central America

  • Luis Rivera

    ()

    (CLACDS-INCAE)

  • Hugo Rojas-Romagosa

    ()

    (CPB (the Hague))

Using a global CGE model, we assess the potential macro-economic effects of a future European Union - Central American Association Agreement (EU-CAAA). Currently, many agricultural products from Central America (CA) enter duty-free to the European Union (EU); with two notable exceptions: bananas and sugar. We find that liberalizing the access to both products will bring significant gains to CA, while excluding them from the negotiations will bring no static gains. If trade facilitation mechanisms are implemented and we allow for the expected increase in FDI inflows to CA, welfare gains improve for all scenarios but are conditions on the level of EU agricultural liberalization.

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Paper provided by Institue for International and Development Economics in its series IIDE Discussion Papers with number 20071001.

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Length: 28 pages
Date of creation: Oct 2007
Handle: RePEc:lnz:wpaper:20071001
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