The purpose of this paper is to analyse the structural changes and pattern of specialisation that followed the formation of the Central American Common Market (CACM) in the early 1960s. In the first section it is shown that the fear did exist that trade‐creating and “backwash” effects would dominate as a result of unrestricted free trade in the region. In sections two and three, evidence is presented to suggest that these fears have proved to be largely unfounded. The operation of market forces has led to an unplanned reciprocal exchange of manufactures for manufactures and non‐manufactures for non‐manufactures. Moreover, most of the structural changes within the manufacturing sector appear to have taken the form of intra‐industry specialisation, i.e. specialisation in the differentiated products of an industry with no need to abandon entire high‐cost industries.
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