the imported price of cotton, the strength of the U.S. dollar (exchange rate), and tariffs in
the importing countries.
Calculated CBI import demand elasticities indicate cotton imports are very
insensitive to income/GDP and the import price of cotton. On the other hand, imports are
very sensitive to the exchange rate.
The trade creation and trade diversion effects or tariff removals are analyzed.
Trade creation effects are substantially greater than trade diversion effects. The favorable
trade creation effects indicate that the U.S. - CBI agreement has been lucrative with
respect to U.S. cotton exports to the region for the period 1989 - 2007. The insignificant
trade diversion effects on U.S. cotton exports to the top eight CBI importers indicates that
MERCOSUR and the ANDEAN Community has not significantly interfered with U.S.
cotton imports to the CBI.