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| Abstract: Using a multi-sector multi-country computable general equilibrium model, we examine Chile’s strategy of negotiating bilateral free trade agreements with all of its significant trading partners (we refer to this policy as additive regionalism). We also evaluate the Free Trade Agreement of the Americas (FTAA) and Global Free Trade. Taking Chile’s regional arrangements bilaterally, only Chile’s agreements with “Northern ” partners provide sufficient market access to overcome the trade diversion costs for Chile. Due to preferential market access, however, additive regionalism is likely to provide Chile with gains many multiples of the static welfare gains from unilateral free trade. We find that at least one partner country loses from each of the regional agreements we consider, and excluded countries as a group always lose. We estimate that the FTAA produces large welfare gains for the members, but the EU is a big loser. Gains to the world from Global Free Trade are estimated to be at least 36 times larger than from the FTAA, and even the countries of the Americas in aggregate gain more from Global Free Trade than from the FTAA. | |||||||||||||||
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