The Trade Effects of MERCOSUR and The Andean Community on U.S. Cotton Exports to CBI countries

strength U.S. exports become more expensive in the foreign market. Thus, it is expected
that U.S. exports will have a negative relationship with the value of the U.S. dollar.

IV - Estimation procedures and Data

The import demand model used panel data for eight countries with annual
observations from 1989-2007. A pooling technique, the process of combining cross-
section and time series data, is used in the analysis.

U.S. cotton exports to CBI countries were obtained from the United States
International Trade Commission (USITC) database. The prices were computed by
dividing the value of imports by the quantity. The data are measured in U.S. dollars and
are converted into real dollars for the analysis using the Consumer Price Index (CPI).
Export data for MERCOSUR and the Andean Community were obtained from the UN
COMTRADE database.

Real GDP data from each country were obtained from the International Monetary
Fund’s World Economic Outlook database. These data are converted to U.S. dollars to
maintain a common unit of measure. Tariff data were obtained from the World Trade
Organization (WTO) database. Tariff data for the Bahamas was unavailable so they were
estimated.

The real exchange data between the U.S. dollar and each foreign currency were
obtained from the Economic Research Service (ERS). These data are measured as the
foreign currency per U.S. dollar, which means that an increase indicates appreciation of
the U.S. dollar and a decrease means depreciation for the U.S. dollar.

V - Trade Creation and Trade Diversion

If tariffs between the U.S. and the Caribbean Basin Initiative are removed, trade

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