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The Free Trade Agreement between Colombia and USA: What can happen to Colombia?

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Author Info
Orlando Gracia
Hernando Zuleta

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Abstract

In order to assess the impact of a Free Trade Agreement (FTA) between Colombia and the United States of America, we describe the characteristics of the Colombian economy emphasizing its trade patterns and perspectives and identifying the sectors and regions that are likely to be the most sensitive to a FTA. We argue that the effects of a bilateral trade agreement between the USA and Colombia would be similar to those of past trade reforms. However, as Colombia and the USA negotiate the agreement, many other Latin American countries are about to sign trade agreements with the USA. Therefore, the Colombian economy is likely to be affected also by the change in trade rules among its partners. We first analyze the effect of past reforms in Colombia and Mexico, which is our benchmark, and then, using an applied multiregional general equilibrium model, simulate the effects over the Colombian economy of a bilateral agreement with USA. We conclude that, although moderate, there will be an increase in welfare and production of the Colombian consumers and firms.

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Paper provided by DEGIT, Dynamics, Economic Growth, and International Trade in its series DEGIT Conference Papers with number c010_023.

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Length: 53 pages JEL Classification: F14, F15, F47, O24
Date of creation: Jun 2005
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Handle: RePEc:deg:conpap:c010_023

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Keywords: International Trade Agreements; Colombia; multiregional model;

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  1. Harrison, Glenn W. & Rutherford, Thomas F. & Tarr,David & Gurgel, Angelo, 2003. "Regional, multilateral, and unilateral trade policies on MERCOSUR for growth and poverty reduction in Brazil," Policy Research Working Paper Series 3051, The World Bank. [Downloadable!]
  2. Ricardo J. Caballero & Eduardo M.R.A. Engel & Alejandro Micco, 2004. "Microeconomic Flexibility in Latin America," Working Papers 884, Economic Growth Center, Yale University. [Downloadable!]
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  3. Gordon H. Hanson, 2003. "What Has Happened to Wages in Mexico since NAFTA?," NBER Working Papers 9563, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  4. Attanasio, Orazio & Goldberg, Pinelopi K. & Pavcnik, Nina, 2004. "Trade reforms and wage inequality in Colombia," Journal of Development Economics, Elsevier, vol. 74(2), pages 331-366, August. [Downloadable!] (restricted)
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  5. Marcela Eslava & John Haltiwanger & Adriana Kugler & Maurice Kugler, 2004. "The Effect of Structural Reforms on Productivity and Profitability Enhancing Reallocation: Evidence from Colombia," NBER Working Papers 10367, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  6. Ana Fernandes, 2002. "Trade Policy, Trade Volumes and Plant-Level Productivity in Colombian Manufacturing Industries," Working Papers 847, Economic Growth Center, Yale University. [Downloadable!]
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  7. Eduardo Lora, 2001. "Las Reformas estructurales en América Latina: Qué se ha reformado y cómo medirlo," RES Working Papers 4288, Inter-American Development Bank, Research Department. [Downloadable!]
  8. Raphael Bergoeing & Patrick J. Kehoe & Timothy J. Kehoe & Raimundo Soto, 2001. "A Decade Lost and Found: Mexico and Chile in the 1980s," Documentos de Trabajo 110, Centro de Economía Aplicada, Universidad de Chile. [Downloadable!]
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  9. Rutherford, Thomas F, 1999. "Applied General Equilibrium Modeling with MPSGE as a GAMS Subsystem: An Overview of the Modeling Framework and Syntax," Computational Economics, Springer, vol. 14(1-2), pages 1-46, October. [Downloadable!]
  10. Clark, Ximena & Dollar, David & Micco, Alejandro, 2004. "Port efficiency, maritime transport costs, and bilateral trade," Journal of Development Economics, Elsevier, vol. 75(2), pages 417-450, December. [Downloadable!] (restricted)
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  11. Dirección de Estudios Económicos & Dirección de Desarrollo Empresarial, 2003. "Efectos de un acuerdo bilateral de libre comercio con Estados Unidos," ARCHIVOS DE ECONOMÍA 002426, DEPARTAMENTO NACIONAL DE PLANEACIÓN. [Downloadable!]
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