Expansions of the European Union and the Nafta: Implications for New and Non-Member Countries

Abstract

This paper examines the effects of enlargement of the European Union and the NAFTA on new and non-member countries. The empirical analysis is based on the applied general equilibrium model underlying the Global Trade Analysis Project (GTAP), version 5. The paper shows that expansions of the two trade blocs will substantially benefit potential member countries in Latin America, Central and East Europe. The proposed expansions however, will cause trade diversions, especially in the textile and apparel sectors of Asia.

Keywords: Trade Blocs, Open Regionalism, Trade Diversion, General Equilibrium, Textiles and Apparel

JEL Classification: F1, O51, O52, O54