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

Listed author(s):
  • 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.

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Paper provided by Department of Economics - dECON in its series Documentos de Trabajo (working papers) with number 0903.

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Length: 35 pages
Date of creation: Nov 2003
Handle: RePEc:ude:wpaper:0903
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References listed on IDEAS
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  1. 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.
  2. Marcel Vaillant & Alvaro Ons, 2003. "Winners and Losers in a Free Trade Area between The United States and MERCOSUR," Documentos de Trabajo (working papers) 1403, Department of Economics - dECON.
  3. 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.
  4. Ethier, Wilfred J, 1998. "The New Regionalism," Economic Journal, Royal Economic Society, vol. 108(449), pages 1149-1161, July.
  5. Antoni Estevadeordal & Robert Devlin, 2001. "What's New in the New Regionalism in the Americas?," IDB Publications (Working Papers) 9372, Inter-American Development Bank.
  6. repec:fth:michin:376 is not listed on IDEAS
  7. 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.
  8. 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.
  9. 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.
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