Abstract
This paper evaluates the extent to which the establishment of the Andean Free Trade Zone (AFTZ) has led to in intra-regional trade creation, as promised by open regionalism, or to trade diversion. Open regionalism is a dynamic process in which economic agreements are intermediate steps towards integration with the world economy. The reduction of both policy and natural barriers to intra-regional trade decreases transaction costs, increases returns and levels of investment, and leads to trade creation. This paper calculates ex post income elasticities of import demand, the intensity of trade index, and the propensity to export intra and extra-regionally before (1980-1992) and after (1993-2000) the establishment of the AFTZ. The analysis of ex post income elasticities of import demand shows that the establishment to the AFTZ led to trade creation and to gross trade creation, as the open regionalism view proposes, and not to trade diversion. These results are confirmed by the intensity of trade index and the propensity to export intra and extra-regionally. Additionally, the Andean Community has supported the agenda of becoming part of wider economic agreements such as Mercosur and the Free Trade Area of the Americas (FTAA), in keeping with the open regionalism approach, to be consistent with the GATT-WTO principles.
Original language | Spanish |
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Pages (from-to) | 45-71 |
Number of pages | 27 |
Journal | Trimestre Economico |
Volume | 71 |
Issue number | 1 |
State | Published - Jan 2004 |