Economic Growth Creation Or Diversion? The Record of Trade Agreements In Latin America

Abstract

This paper examines the effects of Preferential Trade Agreements (PTAs) andGATT/WTO membership on economic growth using a sample of seventeen LatinAmerican countries for the period 1950-2004. In general, the evidence indicatesthat the proliferation of bilateral and multi country regional and extra regional tradeagreements has not resulted in faster economic growth. On the contrary, we find thatPTAs and WTO only have a weak positive effect on increasing trade openness; butthis relationship does not translate into faster economic growth when controlling forcapital, labor force and trade openness. These results are robust to both static anddynamic model specifications, indicating that trade openness has a positive effect onper capita output growth, but PTA and WTO membership do not. Integration via defacto increases output growth while integration via de jure does not. Based on theresults, PTAs create a net diversion effect on economic growth.