Intra-Industry Trade between the U.S. and the Major Latin American Countries: Measurement and Implications for Free Trade in the Americas

This paper presents estimates for the level of intra-industry trade in the 1994 bilateral commerce between the United States and Argentina, Brazil, Chile, Colombia, Mexico, Paraguay, Uruguay, and Venezuela. As theory predicts, intra-industry trade is positively correlated with income and with foreign investment in this study. Furthermore, Mexico and the United States present high levels of intra-industry trade, while the other Latin American countries analyzed have relatively low levels. The paper concludes that Mexico should experience much less difficulty in adjusting to free trade with the United States than the other countries. The low levels of intra-industry trade between the U.S. and the other Latin American nations signal that increased trade between these areas could bring about significant dislocation of resources and high adjustment costs.

Back to my homepage