Trade, Economic and Welfare impacts of the CARICOM-Canada Free Trade Agreement

Abstract

This paper estimates the trade, revenue and welfare effects of the proposed Caribbean Community (CARICOM)-Canada FTA on CARICOM countries using a partial equilibrium model. The welfare analysis also takes into account the Economic Partnership Agreement (EPA) which was signed in 2008 between the CARIFORUM (CARICOM and the Dominican Republic) countries and the EU. The Revealed Comparative Advantage (RCA) index, trade complementarity index and transition probability matrices are employed to examine the dynamics of comparative advantage for CARICOM countries exports to Canada. The results obtained from the partial equilibrium model indicate adverse revenue and welfare effects for CARICOM member states. The results from various trade indices employed do not provide evidence to suggest that a FTA between CARICOM countries and Canada can improve trade outcomes