Chile's regional arrangements and the Free Trade Agreement of the Americas: the importance of market access

Glenn Harrison, Thomas Rutherford (rutherford@aae.wisc.edu) and David Tarr

No 2634, Policy Research Working Paper Series from The World Bank

Abstract: Using a multisector, computable general equilibrium model, the authors examine Chile's strategy of negotiating bilateral free trade agreements with all of its significant trading partners (referring to this policy as additive regionalism). They also evaluate the Free Trade Agreement of the Americas (FTAA) and global free trade. Among Chile's bilateral regional agreements, only Chile's agreements with"Northern"partners provide enough market access to offset the costs to Chile of trade diversion. Because of preferential market access, however, additive regionalism is likely to provide Chile with many times as many gains as the static welfare gains from unilateral free trade. The authors find that at least one partner country loses from each of the regional trade agreements they consider, and excluded countries as a group they always lose. They estimate that the FTAA produces large welfare gains for the members, with the European Union being the big loser. Gains to the world from global free trade are estimated to be at least 36 times greater than gains from the FTAA. Even countries of the Americas in aggregate gain more from global free trade than from the FTAA.

Keywords: Rules of Origin; Economic Theory&Research; Environmental Economics&Policies; Trade Policy; Payment Systems&Infrastructure; TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT; Trade and Regional Integration; Economic Theory&Research; Environmental Economics&Policies; Rules of Origin (search for similar items in EconPapers)
Date: 2001-07-31
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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