TY - JOUR
T1 - Computational analysis of the Free Trade Area of the Americas (FTAA)
AU - Brown, Drusilla K.
AU - Kiyota, Kozo
AU - Stern, Robert M.
N1 - Funding Information:
The research for this paper was funded by the U.S. Department of Labor (DOL). The analysis and conclusions are those of the authors and do not necessarily reflect those of the DOL or the U.S. Government. Helpful comments on an earlier version of the paper were provided by Greg Schoepfle and anonymous referees. Kozo Kiyota was a Visiting Scholar at the University of Michigan when this research was undertaken and would like to thank the Kikawada Fellowship Program for providing financial support.
Copyright:
Copyright 2005 Elsevier B.V., All rights reserved.
PY - 2005/8
Y1 - 2005/8
N2 - We use the Michigan Model of World Production and Trade to assess the economic effects of the Free Trade Area of the Americas (FTAA). The model covers 18 economic sectors in each of 22 countries/regions and is based on Version 5.4 of the GTAP database for 1997, together with specially constructed estimates of services barriers and other data on sectoral employment and numbers of firms. The distinguishing feature of the model is that it incorporates some aspects of trade with imperfect competition in the manufacturing and services sectors. The modeling focus is on the effects of the bilateral removal of tariffs on agriculture and manufactures and of services barriers. The computational results indicate that the FTAA would increase the economic welfare of member countries by $118.8 billion, with the largest increases accruing to the United States, $67.6 billion, and to South America, $27.6 billion. The FTAA is trade-diverting for most of the rest of the world, with a welfare reduction of $9.3 billion. In comparison, if the FTAA countries were to adopt unilateral free trade, total member welfare would increase by $476.8 billion and global welfare by $812.7 billion. If multilateral free trade were adopted by all countries/regions in the global trading system, the welfare effects would be considerably larger, $751.2 billion for the FTAA members and $2.4 trillion globally.
AB - We use the Michigan Model of World Production and Trade to assess the economic effects of the Free Trade Area of the Americas (FTAA). The model covers 18 economic sectors in each of 22 countries/regions and is based on Version 5.4 of the GTAP database for 1997, together with specially constructed estimates of services barriers and other data on sectoral employment and numbers of firms. The distinguishing feature of the model is that it incorporates some aspects of trade with imperfect competition in the manufacturing and services sectors. The modeling focus is on the effects of the bilateral removal of tariffs on agriculture and manufactures and of services barriers. The computational results indicate that the FTAA would increase the economic welfare of member countries by $118.8 billion, with the largest increases accruing to the United States, $67.6 billion, and to South America, $27.6 billion. The FTAA is trade-diverting for most of the rest of the world, with a welfare reduction of $9.3 billion. In comparison, if the FTAA countries were to adopt unilateral free trade, total member welfare would increase by $476.8 billion and global welfare by $812.7 billion. If multilateral free trade were adopted by all countries/regions in the global trading system, the welfare effects would be considerably larger, $751.2 billion for the FTAA members and $2.4 trillion globally.
KW - Free trade agreements
KW - Multilateral liberalization
KW - Unilateral liberalization
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U2 - 10.1016/j.najef.2005.03.002
DO - 10.1016/j.najef.2005.03.002
M3 - Article
AN - SCOPUS:23444434304
SN - 1062-9408
VL - 16
SP - 153
EP - 185
JO - North American Journal of Economics and Finance
JF - North American Journal of Economics and Finance
IS - 2
ER -