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Quantitative assessment of a free trade agreement between MERCOSUR and the European Union

Listed author(s):
  • Boyer, Ivan
  • Schuschny, Andrés Ricardo
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    AbstractUsing a GTAP CGE model/database, this paper assesses the possible effects of a free trade agreement (FTA); between the MERCOSUR and the European Union (EU);. The study takes into consideration the most important recent free trade agreements signed among the Latin American countries, as well as the latest European Union enlargements. With a 2004+ benchmark base scenario where tariffs were updated by the addition of information on trade agreements just signed by Latin American countries, two different policy simulations are addressed: (i); full liberalization, (ii); liberalization excluding sensitive products. The global CGE model allows analyzing direct and indirect socio-economic impacts on subscriber countries as well as on other countries in the region.From the point of view of the MERCOSUR countries, the results suggest that the FTA would be beneficial to foster their exports, especially in the case of Light manufactures. Imports to MERCOSUR from the EU would be increased, particularly in heavy manufactures sectors. In terms of GDP the results remain positive in the case of all the MERCOSUR countries in all simulated scenarios. However, welfare implications are unevenly distributed in favor of all the MERCOSUR countries in the simulated scenarios. The inclusion of sensitive products in the agreements seems to reduce the magnitude of the results but does not change the direction of the impacts. In any case, active public policies to mitigate the negative effects on sectors, enhance positive impacts and seize dynamic opportunities towards sustainable development must be undertaken. The main conclusion points out a potential complementary trade relationship among these two regions.

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    Paper provided by Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL) in its series Estudios Estadísticos with number 69.

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    Date of creation: Apr 2010
    Handle: RePEc:ecr:col027:4774
    Note: Incluye Bibliografía
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    1. Terrie Walmsley, 1998. "LONG-RUN SIMULATIONS WITH GTAP: Illustrative Results from APEC Trade Liberalisation," Centre of Policy Studies/IMPACT Centre Working Papers ip-70, Victoria University, Centre of Policy Studies/IMPACT Centre.
    2. Javorcik Beata Smarzynska & Wei Shang-Jin, 2003. "Pollution Havens and Foreign Direct Investment: Dirty Secret or Popular Myth?," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 3(2), pages 1-34, December.
    3. Renato G. Flores & Masakazy Watanuki, 2008. "Integration options for Mercosur : a quantitative analysis by the AMIDA model," INTAL Working Papers 1474, Inter-American Development Bank, INTAL.
    4. Renato G. Flôres Jr. & Masakazu Watanuki, 2008. "Integration Options for MERCOSUR: A Quantitative Analysis by the AMIDA Model," IDB Publications (Working Papers) 9287, Inter-American Development Bank.
    5. Germán Calfat & Renato G. Flôres, 2006. "The EU-Mercosol Free Trade Agreement: Quantifying Mutual Gains," Journal of Common Market Studies, Wiley Blackwell, vol. 44, pages 921-945, December.
    6. O'Ryan, Raúl & De Miguel, Carlos J. & Miller, Sebastian & Pereira, Mauricio, 2011. "The Socioeconomic and environmental effects of free trade agreements: a dynamic CGE analysis for Chile," Environment and Development Economics, Cambridge University Press, vol. 16(03), pages 305-327, June.
    7. Yvan Decreux & Lionel Fontagné, 2006. "A Quantitative Assessment of the Outcome of the Doha Development Agenda," Working Papers 2006-10, CEPII research center.
    8. Vaillant, Marcel, 2005. "MERCOSUR: Southern Integration under Construction," MPRA Paper 47251, University Library of Munich, Germany, revised Feb 2005.
    9. Schuschny, Andrés Ricardo & Durán Lima, José Elías & De Miguel, Carlos J., 2007. "El modelo GTAP y las preferencias arancelarias en América Latina y el Caribe: reconciliando su año base con la evolución reciente de la agenda de liberalización regional," Manuales 53, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    10. Hertel, Thomas, 1997. "Global Trade Analysis: Modeling and applications," GTAP Books, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University, number 7685.
    11. Mahrukh Doctor, 2007. "Why Bother With Inter-Regionalism? Negotiations for a European Union-Mercosur Agreement," Journal of Common Market Studies, Wiley Blackwell, vol. 45, pages 281-314, June.
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