An Export Portfolio Assessment of Regional Free Trade Agreements: A Mercosur and Pacific Alliance Perspective

Raul de Gouvea, Dimitri Kapelianis, Manuel-Julian R. Montoya, Gautam Vora

Department of FIT Management, Anderson School of Management, University of New Mexico, Albuquerque, USA.
Department of MIDS, Anderson School of Management, University of New Mexico, Albuquerque, USA.

DOI: 10.4236/me.2014.55058                

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.

Keywords

Export Performance, Free Trade Area, Regional Free Trade Area, Single Index Model, Sharpe Measure

Conflicts of Interest

The authors declare no conflicts of interest.

References

[1]	Herman, D. (2013) Post-Doha Trade Governance: Atlantic Hegemony or WTO Resurgence? CIGI Policy Brief No. 3, April. Centre for International Governance Innovation. www.cigionline.org
[2]	Zhang, M. (2013) 9th WTO Bali Ministerial Conference 2013: A Final Attempt to Salvage the Doha Round of World-Trade Talks. www.ibtimes.com
[3]	WTO (2013) Regional Trade Agreements. www.wto.org
[4]	Dymond, W.A. (2007) Doha in the Dumps: The Bilateral Option. Eurostudia, 3, 1-17. http://dx.doi.org/10.7202/017649ar
[5]	EUCE (2007) The Demise of Doha: The End of the Multilateral Trading System? The European Union Center of Excellence at the University of North Carolina, Chapel Hill.
[6]	Bhagwati, J. (2013) Dawn of a New System. Finance and Development, 8-13.
[7]	Fergusson, I., Cooper, W., Jurenas, R. and Williams, B. (2013) The Transpacific Partnership Negotiations and Issues for Congress. CRS Report for Congress. Congressional Research Service, Washington DC.
[8]	Furby, D. (2012) Global Trade: The Fall of Doha and the Rise of Bilateral Agreements. Business for New Europe, London.
[9]	Gil, J.M. (2012) From Multilateral Negotiations to Bilateral and Regional Negotiations: The Effect of Doha Stalling. www.usergioarboleda.edu
[10]	Schwab, S. (2011) After Doha: Why the Negotiations Are Doomed and What We Should Do about It. Foreign Affairs, 90, 104-117.
[11]	Haas, E.B. (1964) Beyond the Nation State: Functionalism and International Organization. Stanford University Press, Stanford.
[12]	Duina, F. (2007) The Social Construction of Free Trade: The EU, NAFTA, and Mercosur. Princeton University Press, Princeton.
[13]	Gilpin, R. (1987) The Political Economy of International Relations. Princeton University Press, Princeton.
[14]	Cooley, A. and Spruyt, H. (2009) Contracting States: Sovereign Transfers in International Relations. Princeton University Press, Princeton.
[15]	Keohane, R.O. (1984) After Hegemony: Cooperation and Discord in the World Political Economy. Princeton University Press, Princeton.
[16]	Mattli, W. (1999) The Logic of Regional Integration: Europe and Beyond. Cambridge University Press, Cambridge. http://dx.doi.org/10.1017/CBO9780511756238
[17]	Van Ginkel, H. and Van Langenhove, L. (2003) Integrating Africa: Perspectives on Regional Integration and Development. UNU Press.
[18]	Haokip, T. (2012) Recent Trends in Regional Integration and the Indian Experience. International Area Studies Review, 15, 377-392. http://dx.doi.org/10.1177/2233865912465605
[19]	Chow, P.C.Y. and Ciuriak, D. (2012) The FTA Music Is Playing in Asia: After ECFA, Will Taiwan Join the Dance? International Trade Journal, 26, 61-75. http://dx.doi.org/10.1080/08853908.2012.631870
[20]	Haokip, T. (2012) Recent Trends in Regional Integration and the Indian Experience. International Area Studies Review, 15, 377-392. http://dx.doi.org/10.1177/2233865912465605
[21]	Fergusson, I. (2011) World Trade Organization Negotiations: The Doha Development Agenda. CRS Report for Congress. Congressional Research Service, Washington DC.
[22]	Markowitz, H.G. (1952) Portfolio Selection. Journal of Finance, 7, 77-91.
[23]	Markowitz, H.G. (1959) Portfolio Selection: Efficient Diversification of Investments. Yale University Press, New Haven.
[24]	Sharpe, W.F. (1964) Capital Asset Prices: A Theory of Market Equilibrium under Conditions of Risk. Journal of Finance, 19, 425-442.
[25]	Lintner, J. (1965) The Valuation of Risk Assets and the Selection of Risky Investments in Stock Portfolios and Capital Budgets. Review of Economics and Statistics, 47, 13-37. http://dx.doi.org/10.2307/1924119
[26]	Brainard, W.C. and Cooper, R.N. (1968) Uncertainty and Diversification in International Trade. Studies in Agriculture Economics, Trade and Development, 8, 256-285.
[27]	Paudel, R.B. and Koirala, S. (2006). Application of Markowitz and Sharpe Models in Nepalese Stock Market. Journal of Nepalese Business Studies, 3, 18-35.
[28]	Du Plessis, A.J. and Ward, M. (2009) A Note on Applying the Markowitz Portfolio Selection Model as a Passive Investment Strategy on the JSE. Investment Analysis Journal, 69, 39-45.
[29]	Bergh, G. and Van Rensburg, P. (2008) Hedge Funds and Higher Moment Portfolio Selection. Journal of Derivatives & Hedge Funds, 14, 102-106. http://dx.doi.org/10.1057/jdhf.2008.14