Keywords
trade creation
welfare effects
partial equilibrium simulation
How to Cite
Abstract
The objective of this article is to explore the opportunities for growth, diversification and competition present in trade between Colombia and Turkey, as well as those specific ones that would result from a free trade agreement. Five indicators are calculated to characterize trade and trade policy. Disaggregated data from 2010 is used to conduct partial equilibrium simulations yielding estimates on trade, welfare and income effects. The results show that a tariff reduction would result in a trade increase of 3.7% during the first year, mostly reflected in Colombian imports of textiles and exports of bananas. There would also be net trade creation effects, and trade diversion would affect the European Union, the United States and Ecuador. Turkish and Colombian consumers would gain in terms of welfare and Turkish tax revenues would fall more than those of Colombia.
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