IDEAS home Printed from https://ideas.repec.org/p/wbk/wbrwps/1119.html
   My bibliography  Save this paper

The North American Free Trade Agreement (NAFTA) : its effect on South Asia

Author

Listed:
  • Safadi, Raed
  • Yeats, Alexander

Abstract

Over the past three decades, free trade agreements were mostly a European phenomenon European Free Trade Agreement [EFTA], European Economic Community [EEC], and their regional arrangements). Recently, this phenomenon has reached the Americas and is growing. The authors show that free trade agreements now cover about half of world trade in manufactured goods and about 46 percent of total world trade. Free trade agreements discriminate in favor of member countries, so other exporters are naturally concerned about their trade being displaced. The authors try to quantify the adverse third-part effects of the recently concluded North American Free Trade Agreement (NAFTA) on the developing countries of South Asia. They find that because the NAFTA countries and South Asia export different types of goods,exports from South Asia will be displaced for only a narrow range of products (probably little more than 10 four-digit SITC groups). The sector most affected is textiles and clothing, given that the preferential removal of tariffs (in the 15 to 30 percent range) and MFA quotas could give Mexico a formidable competitive advantage in the U.S. market. But domestic supply constraints (Mexico seriously and consistently underutilizes its textile and clothing quotas), and NAFTA's domestic import content regulations should limit the amount of trade that Mexico may displace in these sectors. Using a partial equilibrium trade projection model developed by UNCTAD and the World Bank, the authors try to quantify the trade diversion South Asia could experience in North America as a result of NAFTA. The model focuses on NAFTA's short-run impact on South Asian trade. This study does not address dynamic long-run effects, such as changes in terms of trade, investment diversion, and externalities associated with the growth dividend. The results suggest that the total export decline could be about 1 percent, with projections for Bangladesh slightly higher (because textiles and clothing represent a higher-than-average share of Bangladesh's exports). The authors argue that successful completion of the Uruguay Round would considerably reduce South Asia's potential losses, as it would lower the preference margins that NAFTA could provide its member countries. To put the two events in perspective, the authors note that the trade gains South Asian countries could experience from successful completion of the Uruguay Round are about 100 times greater than the losses they might incur from NAFTA.

Suggested Citation

  • Safadi, Raed & Yeats, Alexander, 1993. "The North American Free Trade Agreement (NAFTA) : its effect on South Asia," Policy Research Working Paper Series 1119, The World Bank.
  • Handle: RePEc:wbk:wbrwps:1119
    as

    Download full text from publisher

    File URL: http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/1993/03/01/000009265_3961004084538/Rendered/PDF/multi0page.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Baldwin, R E & Murray, Tracy, 1977. "MFN Tariff Reductions and Developing Country Trade Benefits under the GSP," Economic Journal, Royal Economic Society, vol. 87(345), pages 30-46, March.
    2. Erzan, Refik & Yeats, Alexander, 1992. "Free trade agreements with the United States : what's in it for Latin America?," Policy Research Working Paper Series 827, The World Bank.
    3. Inotai, Andras, 1991. "Regional integration among developing countries, revisited," Policy Research Working Paper Series 643, The World Bank.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Fernandez-Arias, Eduardo & Spiegel, Mark M., 1998. "North-South customs unions and international capital mobility," Journal of International Economics, Elsevier, vol. 46(2), pages 229-251, December.
    2. Bhattacharya, Swapan K. & Bhattacharyay, Biswa N., 2007. "An empirical analysis on prospects and challenges of BIMSTEC-Japan trade integration," Journal of Asian Economics, Elsevier, vol. 18(3), pages 509-536, June.
    3. Swapan K. Bhattacharya, 2001. "Regional Trading Arrangements among SAARC Countries and India's Imports?â€," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 2(2), pages 281-312, September.
    4. Eduardo Fernández-Arias & Mark M. Spiegel, 1997. "Uniones aduaneras norte-sur y movilidad internacional del capital," Research Department Publications 4061, Inter-American Development Bank, Research Department.
    5. Biswa N Bhattacharyay & Swapan K. Bhattacharya, 2010. "Free Trade Agreement between People’s Republic of China and India: Likely Impact and Its Implications to Asian Economic Community," Working Papers id:3272, eSocialSciences.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Dutt, Pushan & Mihov, Ilian & Van Zandt, Timothy, 2013. "The effect of WTO on the extensive and the intensive margins of trade," Journal of International Economics, Elsevier, vol. 91(2), pages 204-219.
    2. Lord, Montague, 2000. "Viet Nam: Small Scale Technical assistance for Capacity Building of Ministry of Finance to Support Tariff, Industry and Subsidy Analysis for the WTO Accession," MPRA Paper 41158, University Library of Munich, Germany.
    3. André Sapir & Lars Lundberg, 1984. "The U.S. Generalized System of Preferences and Its Impacts," NBER Chapters, in: The Structure and Evolution of Recent US Trade Policy, pages 195-236, National Bureau of Economic Research, Inc.
    4. Philippe Martin & Thierry Mayer & Mathias Thoenig, 2008. "Make Trade Not War?," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 75(3), pages 865-900.
    5. Marcelo de Paiva Abreu, 1993. "Brazil-US economic relations and the enterprise for the Americas Initiative," Textos para discussão 296, Department of Economics PUC-Rio (Brazil).
    6. Marinov, Eduard, 2019. "Африканската Континентална Зона За Свободна Търговия: Защо Африка Се Връща Към Мултилатерализма [The African Continental Free Trade Area]," MPRA Paper 110919, University Library of Munich, Germany.
    7. Mary Amiti & John Romalis, 2007. "Will the Doha Round Lead to Preference Erosion?," IMF Staff Papers, Palgrave Macmillan, vol. 54(2), pages 338-384, June.
    8. Yamazaki, Fumiko, 1996. "Potential erosion of trade preferences in agricultural products," Food Policy, Elsevier, vol. 21(4-5), pages 409-417.
    9. IORDACHI, Victoria & ROŞCA, Marcelina, 2015. "Implementation Of Financial Derivatives On The Capital Market Of Republic Of Moldova: Challenges And Opportunities," Journal of Financial and Monetary Economics, Centre of Financial and Monetary Research "Victor Slavescu", vol. 2(1), pages 142-151.
    10. Dornbusch, Rüdiger, 1995. "North-South trade relations in the Americas: the case for free trade," Coediciones, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 1411.
    11. Van Zandt, Timothy & Mihov, Ilian & Dutt, Pushan, 2011. "Does WTO Matter for the Extensive and the Intensive Margins of Trade?," CEPR Discussion Papers 8293, C.E.P.R. Discussion Papers.
    12. Eduard Marinov, 2014. "International Trade Geographic Structure of African Regional Economic Communities," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 2, pages 69-98.
    13. Madanmohan Ghosh & Carlo Perroni & John Whalley, 1998. "The Value of MFN Treatment," NBER Working Papers 6461, National Bureau of Economic Research, Inc.
    14. Lyu, Jianxing & Prehn, Soren & Zhang, Yanjie & Glauben, Thomas & Zeng, Yinchu, 2021. "Trade creation, political sensitivity and product exclusions: the political economy of agriculture protection in China’s FTAs," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 63(03), January.
    15. Othieno, Lawrence & Shinyekwa, Isaac, 2011. "Trade, Revenue And Welfare Effects Of The East African Community Customs Union Principle Of Asymmetry On Uganda: An Application Of Wits-Smart Simulation Model," Research Series 150480, Economic Policy Research Centre (EPRC).
    16. Weintraub, Sidney, 1992. "Western Hemisphere free trade: getting from here to there," Sede de la CEPAL en Santiago (Estudios e Investigaciones) 33905, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    17. Corden, W. Max, 1995. "A Western Hemisphere free trade area: implications for Latin America," Coediciones, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 1400.
    18. Langhammer, Rolf J., 1983. "Die allgemeinen Zollpräferenzen der Europäischen Gemeinschaft für Entwicklungsländer: Fehlschlag oder Erfolg? Eine kritische Bewertung der ersten Dekade," Kiel Discussion Papers 95, Kiel Institute for the World Economy (IfW Kiel).
    19. Krissoff, Barry & Sharples, Jerry A., 1993. "Preferential Trading Arrangements In Western Hemisphere Countries," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 22(1), pages 1-11, April.
    20. Zhu, Shushuai & Buongiorno, Joseph & Brooks, David J., 2001. "Effects of accelerated tariff liberalization on the forest products sector: a global modeling approach," Forest Policy and Economics, Elsevier, vol. 2(1), pages 57-78, April.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:1119. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Roula I. Yazigi (email available below). General contact details of provider: https://edirc.repec.org/data/dvewbus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.