THE EFFECTS OF PACIFIC ALLIANCE ON TRADE AND WELFARE OF THEIR MEMBERS AND MERCOSUR COUNTRIES

Abstract

The paper examines the impacts from the trade liberalization on trade and welfare among the Pacific Alliance (PA) using the computable general equilibrium Global trade analysis project (Gtap). The results show that the gains are small, both in terms of trade and welfare. The more outward orientation of its members and the existence of previous preferential trade agreements among them reduced the possible gains. PA members, except Colombia, benefit from welfare gains, due to terms of trade improvements to the detriment of non-members. Mercosur and Nafta countries would be most negatively affected by the new bloc, as the preferences granted by the PA members reduced the market access to these two important trade partners of the bloc.