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Potential EU-Mercosur Free Trade Agreement: Impact Assessment, Volume 1: Main results

Author

Listed:
  • Alison Burrell

    (independent consultant)

  • Emanuele Ferrari

    (Oxford Brooks University)

  • Aida González Mellado

    (European Commission JRC)

  • Mihaly Himics

    (University of Bonn)

  • Jerzy Michalek

    (University of Kiel)

  • Shailesh Shrestha

    (Scottish Agricultural College)

  • Benjamin Van Doorslaer

    (European Commission JRC)

Abstract

This report presents the simulations made with two different models of two alternative hypothetical versions of a bilateral free trade agreement between the EU and Mercosur. The two versions of the agreement are based on the final negotiating positions of each party in the previous unresolved negotiating round. A global CGE model, GLOBE, simulates the economy-wide impacts of the trade policy changes involving all sectors of the two regional blocks. A global partial equilibrium model, CAPRI, simulates only the impacts generated by changes in agricultural trade policy and incurred by the agricultural sectors of the two regions. However, CAPRI considers individual agricultural products in more detail and can generate the territorial distribution of their production within the EU at the NUTS 2 regional level. The simulation results show that the economic losses and the adjustment pressures arising from a bilateral trade agreement between the EU and the countries of Mercosur would, as far as the EU is concerned, fall very heavily on the agricultural sector. The gains to other sectors would be widely diffused and, given the very small magnitude of these gains relative to the EU economy as a whole, would be easily absorbed without imposing an adjustment burden. The aggregate welfare changes for the EU, whether measured across the whole economy or on a partial basis with respect only to the activities agricultural production and food consumption, would be small. However, the trade-off involved in the redistribution of income between agriculture and the rest of the economy is steeper in the scenarios depicting the terms requested by Mercosur than in those involving the terms offered by the EU. The Mercosur request provokes a much greater downward impact on EU agriculture whereas the additional gains elsewhere (to non-agrifood sectors or to consumers in the EU) are relatively smaller.

Suggested Citation

  • Alison Burrell & Emanuele Ferrari & Aida González Mellado & Mihaly Himics & Jerzy Michalek & Shailesh Shrestha & Benjamin Van Doorslaer, 2011. "Potential EU-Mercosur Free Trade Agreement: Impact Assessment, Volume 1: Main results," JRC Research Reports JRC67394, Joint Research Centre (Seville site).
  • Handle: RePEc:ipt:iptwpa:jrc67394
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    File URL: https://publications.jrc.ec.europa.eu/repository/handle/JRC67394
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    Citations

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    Cited by:

    1. Franz Sinabell & Julia Grübler & Oliver Reiter, 2020. "Implications of the EU-Mercosur Association Agreement for Austria - A Preliminary Assess," FIW Research Reports series VII-003, FIW.
    2. Amarendra Sahoo & Ignacio Perez Dominguez & Sarah Mubareka & Giulia Fiorese & Giacomo Grassi & Roberto Pilli & Mihaly Himics & Viorel Blujdea & Marco Follador & Frederik Neuwahl & Raffaele Salvucci & , 2021. "Improved Modelling Framework for Assessing the Interaction between the Energy, Agriculture, Forestry and Land Use Change Sectors: Integrating the CAPRI, LUISA-BEES, CBM and POTEnCIA models," JRC Research Reports JRC123172, Joint Research Centre (Seville site).
    3. Mittenzwei, Klaus & Britz, Wolfgang & Wieck, Christine, 2014. "Does the “green box” of the European Union distort global markets?," Bio-based and Applied Economics Journal, Italian Association of Agricultural and Applied Economics (AIEAA), vol. 3(1), pages 1-20, April.
    4. Ignacio Perez Dominguez & Thomas Fellmann, 2018. "PESETA III: Agro-economic analysis of climate change impacts in Europe," JRC Research Reports JRC113743, Joint Research Centre (Seville site).
    5. Himics, Mihaly & Listorti, Giulia & Tonini, Axel, 2020. "Simulated economic impacts in applied trade modelling: A comparison of tariff aggregation approaches," Economic Modelling, Elsevier, vol. 87(C), pages 344-357.
    6. 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.
    7. Niemi, J., 2018. "European Market for Mercosur Agricultural Exports: An econometric study of commodity trade flows," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 275934, International Association of Agricultural Economists.
    8. Jacopo Timini & Francesca Viani, 2020. "The EU-MERCOSUR free trade agreement: main features and economic impact," Economic Bulletin, Banco de España, issue 1/2020.
    9. Jacopo Timini & Francesca Viani, 2020. "El tratado de libre comercio entre la UE y el MERCOSUR: principales elementos e impacto económico," Boletín Económico, Banco de España, issue 1/2020.
    10. Himics, Mihaly & Britz, Wolfgang, 2013. "Trade Diversion Effects of Preferential Trade Agreements Under Tariff Rate Quota Regimes," 135th Seminar, August 28-30, 2013, Belgrade, Serbia 160383, European Association of Agricultural Economists.
    11. Franz Sinabell & Julia Grübler & Oliver Reiter, 2020. "Implications of the EU-Mercosur Association Agreement for Austria - A Preliminary Assess," FIW Research Reports series VII-003, FIW.
    12. Sanchez-Diez, A. & Ruiz-Huelamo, P., 2012. "Relationships Between Eu-Mercosur: Analysis Of Economic Complementarities In Association Agreement," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 12(2).
    13. Jafari, Yaghoob & Britz, Wolfgang & Guimbard, Houssein & Beckman, Jayson, 2021. "Properly capturing tariff rate quotas for trade policy analysis in computable general equilibrium models," Economic Modelling, Elsevier, vol. 104(C).
    14. Franz Sinabell & Julia Grübler & Oliver Reiter, 2020. "Implications of the EU-Mercosur Association Agreement for Austria. A Preliminary Assessment," WIFO Studies, WIFO, number 66364, February.
    15. Mihaly Himics & Thomas Fellmann & Jesus Barreiro‐Hurle, 2020. "Setting Climate Action as the Priority for the Common Agricultural Policy: A Simulation Experiment," Journal of Agricultural Economics, Wiley Blackwell, vol. 71(1), pages 50-69, February.
    16. Emanuele Ferrari & Thomas Chatzopoulos & Ignacio Perez Dominguez & Pierre Boulanger & Kirsten Boysen-Urban & Mihaly Himics & Robert M’barek, 2021. "Cumulative economic impact of trade agreements on EU agriculture: 2021 update," JRC Research Reports JRC123037, Joint Research Centre (Seville site).
    17. Koen Dillen & Emanuele Ferrari & Pascal Tillie & George Philippidis & Sophie Helaine, 2013. "Contribution to the economic impact assessment of policy options to regulate animal cloning for food production with an economic simulation model," JRC Research Reports JRC79995, Joint Research Centre (Seville site).

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