Central American Economic Integration

under which integration would result in economic gain. This paper evaluates one integration effort, the Central American Common Market, in the light of the propositions of customs union theory. The well-known studies by James Meade (The Theory of Customs Unions, 1955) and by Rolf Sannwald and Jacques Stohler (Economic Integration, 1959) provide convenient listings of the general theoretical conclusions. A convenient re-working of the general criteria into a form especially tailored for underdeveloped regions has been provided by Robert L. Allen.' The sources of improved welfare are said to be the expanded opportunities for economies of scale, improved terms of trade from greater bargaining power of the integrated group, and an improved allocation of resources from greater scope for competition and the elimination of inefficient producers. A more detailed statement of criteria for gain is reserved until the basic features of Central American integration have been examined. The Central American nations have made two substantially different treaties of integration within a short time. The first one was The Multilateral Treaty of Free Trade and Central American Economic Integration, signed in 1958 by Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua. Starting with free trade on 200 items in 1959, the goal was to achieve completely