Will FTAA Bring Income Convergence?

Cecilia Maya Ochoa () and Juan Manuel Restrepo Puerta ()

No 3893, Documentos de Trabajo de Valor Público from Universidad EAFIT

Abstract: By the beginning of year 2006, the Free Trade Area of the Americas, FTAA,will be launched. Mixed expectations and concerns about its effects on the individual economieshave grown in the area since this process started in December, 1994. This paper aims to discussa particular expectation -or concern- which is: Will this liberalization of the Americascontribute to increase or to decrease the huge gap in per capita income between theindustrialized economies of the North, -Canada and the U.S.- and the other thirty-twocountries? Based on the analysis of empirical evidence on current trade areas in the region,we conclude that even in the case of equal trade, where the agreement manages to conciliatethe interests of developed and less developed countries, income convergence will, probably, notbe one of the outcomes of this liberalization. The lack of symmetry in an area which gatherscountries at very different stages of development, an asymmetry much more pronounced in theFTAA because it includes the largest economy in the world, prevent us from expecting incomeconvergence even if this trade area becomes a successful one.

Keywords: FTAA; Free Trade Area of the Americas; Income Convergence; Free Trade. (search for similar items in EconPapers)
Pages: 19
Date: 2007-07-26
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