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Integration of the Americas: Welfare Effects and Options for the MERCOSUR


  • Silvia Laens

    (CINVE, Red Mercosur)

  • Inés Terra

    (Departmento de Economía, Facultad de Ciencias Sociales, Universidad de la República and Red Mercosur)


The purpose of this paper is to assess the costs and benefits of the creation of the Free Trade Area of the Americas (FTAA) and other integration options for the MERCOSUR with the other countries in the hemisphere. The GTAP, a multiregional, multisector CGE model is used to simulate the effects of several scenarios that are currently on debate. The existing preferences, granted by previous agreements under the framework of the Latin American Integration Association (LAIA), and the preferential treatment granted by the USA through the Generalized System of Preferences (GSP), the Caribbean Basin Initiative (CBI) and the Andean Trade Preference Act (ATPA) are taken into account. The analysis decomposes the effects of the FTAA in order to assess the importance of market opening and market access and identifies the net effect of trade creation and trade diversion. Additionally, the FTAA initiative is decomposed in possible subregional agreements among the countries involved (MERCOSUR – Andean Community, MERCOSUR – USA, etc.). The assessment includes the estimation of the welfare effects in case the agreement does not include the agricultural sector. All the results are presented for the MERCOSUR as a bloc and for each of its members.

Suggested Citation

  • Silvia Laens & Inés Terra, 2003. "Integration of the Americas: Welfare Effects and Options for the MERCOSUR," Documentos de Trabajo (working papers) 0903, Department of Economics - dECON.
  • Handle: RePEc:ude:wpaper:0903

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    References listed on IDEAS

    1. Brown, Drusilla K. & Deardorff, Alan V. & Stern, Robert M., 1995. "Expanding NAFTA: Economic effects of accession of Chile and other major South American nations," The North American Journal of Economics and Finance, Elsevier, vol. 6(2), pages 149-170.
    2. Grossman, Gene M & Helpman, Elhanan, 1995. "The Politics of Free-Trade Agreements," American Economic Review, American Economic Association, vol. 85(4), pages 667-690, September.
    3. Antoni Estevadeordal & Robert Devlin, 2001. "What's New in the New Regionalism in the Americas?," IDB Publications (Working Papers) 9372, Inter-American Development Bank.
    4. repec:fth:michin:376 is not listed on IDEAS
    5. Marcel, Vaillant & Alvaro, Ons, 2003. "Winners and Losers in a Free Trade Area between the United States and MERCOSUR," MPRA Paper 47315, University Library of Munich, Germany, revised Nov 2003.
    6. Harrison, Glenn W. & Rutherford, Thomas F. & Tarr, David G., 1997. "Trade policy options for Chile : a quantitative evaluation," Policy Research Working Paper Series 1783, The World Bank.
    7. Ethier, Wilfred J, 1998. "The New Regionalism," Economic Journal, Royal Economic Society, vol. 108(449), pages 1149-1161, July.
    8. Harrison, Glenn W. & Rutherford, Thomas F. & Tarr, David G., 2001. "Chile's regional arrangements and the Free Trade Agreement of the Americas : the importance of market access," Policy Research Working Paper Series 2634, The World Bank.
    9. Salazar-Xirinachs, Jose M., 2002. "Proliferation of sub-Regional Trade Agreements in the Americas: an assessment of key analytical and policy issues," Journal of Asian Economics, Elsevier, vol. 13(2), pages 181-212.
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    Cited by:

    1. Silvia Laens & María Inés Terra, 2005. "MERCOSUR: Asymmetries and Strengthening of the Customs Union: Options for the Common External Tariff," IDB Publications (Working Papers) 2923, Inter-American Development Bank.
    2. Carlos Casacuberta & Ianina Rossi & Máximo Rossi, 2003. "El arte y el éxito: un matrimonio incómodo," Documentos de Trabajo (working papers) 0303, Department of Economics - dECON.
    3. Andrés Pereyra, 2003. "Competencia en telefonía móvil en Uruguay: diseño de subastas, contratos y marco institucional," Documentos de Trabajo (working papers) 0103, Department of Economics - dECON.
    4. Cecilia González & Máximo Rossi, 2003. "Participación femenina en el mercado de trabajo: efectos sobre la distribución del ingreso en el Uruguay," Documentos de Trabajo (working papers) 1203, Department of Economics - dECON.
    5. Marcel, Vaillant & Fernando, Lorenzo, 2003. "The MERCOSUR and the Creation of the Free Trade Area of the Americas," MPRA Paper 47316, University Library of Munich, Germany, revised Nov 2003.
    6. Marisa Bucheli & Máximo Rossi, 2003. "El grado de conformidad con la vida: evidencia para las mujeres del Gran Montevideo," Documentos de Trabajo (working papers) 1003, Department of Economics - dECON.
    7. Echenique, Federico & Manelli, Alejandro M., 2003. "Comparative Statics, English Auctions, and the Stolper-Samuelson Theorem," Working Papers 1178, California Institute of Technology, Division of the Humanities and Social Sciences.

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