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Developing Countries and the Gains from Regionalism: Links between Trade and Farm Policy Reforms in Mexico
Author(s) -
Burfisher Mary E.,
Robinson Sherman,
Thierfelder Karen
Publication year - 2002
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.1111/1467-8276.00331
Subject(s) - allocative efficiency , computable general equilibrium , multilateralism , economics , international economics , international trade , agriculture , commercial policy , developing country , offset (computer science) , regionalism (politics) , trade barrier , free trade , macroeconomics , political science , economic growth , geography , neoclassical economics , archaeology , politics , computer science , law , democracy , programming language
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.