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An Analysis of Mercosur's Regional Trading Arrangements

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  • G. Philippidis
  • A. I. Sanjuán

Abstract

After six years of stop‐start negotiations, Mercosur is no closer to signing a regional trading agreement (RTA) with the EU, whilst negotiations to finalise a Free Trade of the Americas Agreement (FTAA) have also stalled. This is due to various factors: economic crises in Mercosur, intransigence by member countries and uncertainty surrounding the outcome of the Doha Round. Estimates from the trade literature predict welfare gains to Mercosur from both RTAs whilst only one study assesses the additional benefits of removing non‐tariff barrier (NTB) trade costs which have remained largely unchallenged within the multilateral forum. In this paper, we improve the treatment of NTB estimates employing a theoretically consistent gravity specification, where calculated tariff‐equivalent estimates are subsequently implemented into a modified computable general equilibrium (CGE) model. Relative to a realistic baseline, and incorporating trade‐induced productivity and capital accumulation effects, we reassess the benefits of both regional initiatives to Mercosur, revisiting the claim that NTB trade cost abolition doubles the ‘standard’ welfare estimates. Contrary to previous studies, the results suggest that an FTAA yields greater gains to Mercosur than an EU RTA whilst the claim of Monteagudo and Watanuki (2003) pertaining to trade cost elimination is understated.

Suggested Citation

  • G. Philippidis & A. I. Sanjuán, 2007. "An Analysis of Mercosur's Regional Trading Arrangements," The World Economy, Wiley Blackwell, vol. 30(3), pages 504-531, March.
    • Handle: RePEc:bla:worlde:v:30:y:2007:i:3:p:504-531
    DOI: 10.1111/j.1467-9701.2007.01002.x
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    3. Owen, P. Dorian & Winchester, Niven, 2014. "The impact of US fresh milk production standards on dairy trade," Journal of Policy Modeling, Elsevier, vol. 36(6), pages 1008-1021.
    4. Vinokurov, Evgeny & Demidenko, Mikhail & Pelipas, Igor & Tochitskaya, Irina & Shymanovich, Gleb & Lipin, Andrey & Movchan, Veronika, 2015. "Estimating the Economic Effects of Reducing Non-Tariff Barriers in the EEU," MPRA Paper 68058, University Library of Munich, Germany.
    5. Engelbert, Tanja & Brockmeier, Martina, 2012. "Analyse Des Freihandelsabkommens Zwischen Der Eu Und Indien Unter Berücksichtigung Von Nicht-Tarifären Handelshemmnissen Im Agrar – Und Ernährungsbereich," 52nd Annual Conference, Stuttgart, Germany, September 26-28, 2012 133034, German Association of Agricultural Economists (GEWISOLA).
    6. Befus, Tanja & Brockmeier, Martina & Bektasoglu, Beyhan, 2012. "Comparing Gravity Model Specifications to Estimate NTBs Using the GTAP Framework," Conference papers 332178, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    7. Timini, Jacopo & Conesa, Marina, 2019. "Chinese Exports and Non-Tariff Measures: Testing for Heterogeneous Effects at the Product Level," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 34(2), pages 327-345.
    8. Konstantin KHOLODILIN & Tanja FENDEL, 2008. "Economic Impact of a Potential FTA Between EU and ASEAN on the German Economy," EcoMod2008 23800060, EcoMod.
    9. Naoto Jinji & Xingyuan Zhang & Shoji Haruna, 2012. "The Effect of Regional Trade Agreements on Technology Spillovers through International Trade," Discussion papers e-11-006, Graduate School of Economics Project Center, Kyoto University.
    10. Sanjuán, Ana I. & Philippidis, George & Resano, Helena, 2013. "Gravity estimation of non tariff measures (NTMs) on EU-USA agri-food trade: Implications for further analysis," Conference papers 332375, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    11. Bektasoglu, Beyhan & Befus, Tanja & Brockmeier, Martina, 2012. "Moving towards EU or MENA? Comparing Alternative Turkish Foreign Policies Utilizing the GTAP framework," Conference papers 332279, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    12. Jeevika Weerahewa, 2009. "Impact of Trade Facilitation Measures and Regional Trade Agreements on Food and Agricultural Tarde in South Asia," Working Papers 6909, Asia-Pacific Research and Training Network on Trade (ARTNeT), an initiative of UNESCAP and IDRC, Canada..
    13. John Ballingall & Niven Winchester, 2010. "Food Miles: Starving the Poor?," The World Economy, Wiley Blackwell, vol. 33(10), pages 1201-1217, October.
    14. Ballingall, John & Winchester, Niven, 2009. "Distance isn’t dead : An empirical evaluation of food miles-based preference changes," NZIER Working Paper 2009/1, New Zealand Institute of Economic Research.
    15. Sophie Drogue & Jean-Philippe Gervais, 2010. "Guidelines and methodology to analyze the different case studies," Working Papers hal-02818030, HAL.
    16. Apokin, Alexander (Апокин, Александр) & Gnidchenko, Andrey (Гнидченко, Андрей) & Sabelnikova, Ekaterina (Сабельникова, Екатерина), 2017. "Import Substitution Potential and Gains from Economic Integration: Disaggregated Estimations [Потенциал Импортозамещения И Выгоды От Экономической Интеграции: Дезагрегированные Оценки]," Ekonomicheskaya Politika / Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 2, pages 44-71, April.

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