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Developing countries and the gains from regionalism: links between trade and farm policy reforms in Mexico

Developing countries and the gains from regionalism: links between trade and farm policy reforms in Mexico

American Journal of Agricultural Economics 84(3): 736-748

ISSN/ISBN: 0002-9092

DOI: 10.1111/1467-8276.00331

We use a multi-country computable general equilibrium (CGE) model with agricultural policy details to simulate the effects of North American Free Trade Agreement (NAFTA). We find that Mexico gains from NAFTA only when it also removes domestic distortions in agriculture. In that case, agriculture can generate allocative efficiency gains large enough to offset the terms of trade losses that arise because Mexico has higher initial tariffs than its NAFTA partners. When an RTA forces a developing country to reform its domestic distortions that are linked to trade restrictions, it becomes a building block toward multilateralism. Reprinted by permission of the publisher.

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Accession: 003707785

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