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Trade Liberalization in Latin America and Eastern Europe: The Cases of Ecuador and Slovenia

Author

Listed:
  • Sang-Wook Stanley Cho

    () (School of Economics, The University of New South Wales)

  • Julian P. Diaz

    () (Bowdoin College)

Abstract

This paper analyzes the potential effects of two ongoing trade liberalization experiences: Ecuador signing a Free Trade Agreement with the United States and Slovenia joining the European Union as a full member. We construct a static Applied General Equilibrium Model and perform a numerical experiment that consists on eliminating all import tariffs that Ecuador and Slovenia impose on the United States and European Union, respectively. To calibrate our models, we work with Input-Output tables and construct a Social Accounting Matrix for each country. We perform additional numerical experiments, such as sensitivity analysis on the import and export elasticities of substitution, a partial liberalization scenario, the fiscal impact of eliminating the tariff revenues and how this loss can be compensated with other taxes, and an alternative trade liberalization framework for Slovenia. We find that both countries benefit from these trade liberalization reforms, with prices falling in the import sector and production rising in the export sector. However, different forms of trade liberalization (free trade agreement vs. customs union) have different implications on the patterns of trade and welfare.

Suggested Citation

  • Sang-Wook Stanley Cho & Julian P. Diaz, 2007. "Trade Liberalization in Latin America and Eastern Europe: The Cases of Ecuador and Slovenia," Discussion Papers 2007-25, School of Economics, The University of New South Wales.
  • Handle: RePEc:swe:wpaper:2007-25
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    References listed on IDEAS

    as
    1. Hummels, David, 1999. "Toward a Geography of Trade Costs," GTAP Working Papers 1162, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
    2. Shoven, John B & Whalley, John, 1984. "Applied General-Equilibrium Models of Taxation and International Trade: An Introduction and Survey," Journal of Economic Literature, American Economic Association, vol. 22(3), pages 1007-1051, September.
    3. Timothy J. Kehoe, 2003. "An evaluation of the performance of applied general equilibrium models of the impact of NAFTA," Staff Report 320, Federal Reserve Bank of Minneapolis.
    4. Michael Rolleigh, 2004. "Plant Heterogeneity and Applied General Equilibrium Models of Trade: Lessons from the CA-US FTA," 2004 Meeting Papers 360, Society for Economic Dynamics.
    5. Timothy J. Kehoe, 1996. "Social accounting matrices and applied general equilibrium models," Working Papers 563, Federal Reserve Bank of Minneapolis.
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    Cited by:

    1. Sang‐Wook (Stanley) Cho & Julian P. Diaz, 2011. "The Welfare Impact Of Trade Liberalization," Economic Inquiry, Western Economic Association International, vol. 49(2), pages 379-397, April.

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    More about this item

    Keywords

    Trade Liberalization; Free Trade Agreement; Customs Union; Fiscal Policy; Social Accounting Matrix; Ecuador; Slovenia;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration

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