Abstract
We use the portfolio theory to assess the export performance of two important regional free trade agreements (RFTAs), namely, Mercosur and the Pacific Alliance, and their constituent countries. The results indicate that the export portfolio of the Pacific Alliance dominates that of Mercosur from a risk-return perspective. When we compare these two regional FTAs’ portfolios to an Asian export portfolio, the performance of the export portfolios of the Latin American RFTAs is dominated by that of the Asian export portfolio. In a larger context, the continual attention paid to these Latin American RFTAs is a reflection of the slow and uneven development of global trade negotiation.
Highlights
The past decades have seen the expansion of bilateral free trade agreements (BFTAs) and regional free trade agreements (RFTAs) across the globe
The slow progress on the Doha round of multilateral trade negotiations, initiated in November 2001, on subjects as diverse as tariffs, non-tariff measures, agriculture, labor standards, environment, investments, transparency, and settlement of trade disputes has provided a new momentum for the development and expansion of bilateral free trade agreements (BFTAs) and regional free trade agreements (RFTAs)
This study applied the Single Index Model portfolio method to assess the ability of RFTAs to manage the risks associated with international trade
Summary
The past decades have seen the expansion of bilateral free trade agreements (BFTAs) and regional free trade agreements (RFTAs) across the globe. The slow progress on the Doha round of multilateral trade negotiations, initiated in November 2001, on subjects as diverse as tariffs, non-tariff measures, agriculture, labor standards, environment, investments, transparency, and settlement of trade disputes has provided a new momentum for the development and expansion of bilateral free trade agreements (BFTAs) and regional free trade agreements (RFTAs). The creation of the WTO was aimed at reforming the global trading system and attempted to provide a new impetus and momentum for emerging economies This objective was initially well-received by emerging and developed nations. As a result of widely different perspectives on international trade and trade disputes amongst WTO members and non-WTO members, the global economy is moving increasingly towards the expansion of preferential trade initiatives, outside the WTO guidelines, such as the Trans-Pacific Partnership (TPP) and the Transatlantic Free.
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