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A highway across the Atlantic? Trade and welfare effects of the EU-Mercosur agreement

Author

Listed:
  • Jacopo Timini
  • Francesca Viani

Abstract

In this paper we analyze the EU-Mercosur agreement and predict its effects on trade and welfare using a general equilibrium structural gravity model. First, we exploit the detailed provision-level information available for the EU-Mercosur agreement to identify partial equilibrium trade effects of existing treaties with similar set of provisions. In a second step, the estimated increase in trade is mapped into reductions in bilateral trade costs and imputed to EU-Mercosur country pairs to compute the general equilibrium effects of the agreement in terms of trade creation, trade diversion, and welfare effects. Our results indicate that the positive effects on trade and welfare stemming from the EU-Mercosur agreement are likely to be economically important, especially for Mercosur countries, and substantially heterogeneous both between and within the two blocs.

Suggested Citation

  • Jacopo Timini & Francesca Viani, 2022. "A highway across the Atlantic? Trade and welfare effects of the EU-Mercosur agreement," International Economics, CEPII research center, issue 169, pages 291-308.
    • Handle: RePEc:cii:cepiie:2022-q2-169-18
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    Cited by:

    1. Eduardo Rodrigues Sanguinet & Augusto Mussi Alvim, 2024. "The effects of the EU-MERCOSUR agreement on bilateral trade: the role of Brexit," International Economics and Economic Policy, Springer, vol. 21(1), pages 227-249, February.
    2. Campos, Rodolfo G. & Estefania-Flores, Julia & Furceri, Davide & Timini, Jacopo, 2023. "Geopolitical fragmentation and trade," Journal of Comparative Economics, Elsevier, vol. 51(4), pages 1289-1315.
    3. Javier Flórez Mendoza & Bernhard Moshammer, 2023. "FIW-PB 60 The EU–Mercosur agreement: Expectations and concerns in light of the new geopolitical situation," FIW Policy Brief series 60, FIW.
    4. Yoto V. Yotov, 2021. "The Variation of Gravity within Countries (or 15 Reasons Why Gravity Should Be Estimated with Domestic Trade Flows)," CESifo Working Paper Series 9057, CESifo.
    5. González, Javier & Latorre, María C. & Valverde, Gabriela Ortiz, 2022. "A comprehensive short and long-run assessment on the impact of the EU-Mercosur agreement on Brazil," Conference papers 333391, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    6. Campos, Rodolfo G. & Timini, Jacopo & Vidal, Elena, 2021. "Structural gravity and trade agreements: Does the measurement of domestic trade matter?," Economics Letters, Elsevier, vol. 208(C).
    7. Rodolfo G. Campos & Jacopo Timini, 2022. "Unequal trade, unequal gains: the heterogeneous impact of MERCOSUR," Applied Economics, Taylor & Francis Journals, vol. 54(49), pages 5655-5669, October.
    8. Gonzalez Cabrera, Carlos Javier & Latorre, María C. & Ortiz Valverde, Gabriela, 2020. "A Computable General Equilibrium Model (CGE) assessment of the short and long-run impact on Brazil of the European Union – Mercosur Trade Agreement," Conference papers 333242, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    9. Gabriel Mhonyera & Daniel Francois Meyer, 2023. "The Impact of AfCFTA on Welfare and Trade: Nigeria and South Africa in Light of Core Export Competences," Sustainability, MDPI, vol. 15(6), pages 1-16, March.
    10. Yoto V. Yotov, 2022. "On the role of domestic trade flows for estimating the gravity model of trade," Contemporary Economic Policy, Western Economic Association International, vol. 40(3), pages 526-540, July.
    11. Iván Kataryniuk & Javier Pérez & Francesca Viani, 2021. "(De-)Globalisation of trade and regionalisation: a survey of the facts and arguments," Occasional Papers 2124, Banco de España.

    More about this item

    Keywords

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    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation

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