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Does Mercosur's trade performance raise concerns about the effects of regional trade arrangements?

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  • Yeats,Alexander James

Abstract

A concern about regional trade arrangements (RTAs) is whether the discriminatory trade barriers applied to RTAs encourage high-cost imports from member countries at the expense of nonmember lower-cost goods. RTA impact evaluations have been hampered by a lack of appropriate empirical procedures for assessing their influence on trade level and direction. The author employs a new index for analyzing the static trade effects of an RTA. He examines export regional orientation changes combined with the revealed comparative advantage (RCA) index to identify trade pattern inefficiencies. This is applied to Mercosur countries'export statistics to determine if recent trade is evolving compatible with the countries'current comparative advantage. The results show the dynamic products in Mercosur's intra-trade are capital intensive goods which members have not displayed a strong export performance in outside markets. Neither the RCA indices nor factor proportion statistics indicate that Mercosur has a comparative advantage in those products. The evidence suggests Mercosur's trade barriers are responsible for the trade changes. Most favored nation tariffs on the fast growing products are above the average for all imports and provide Mercosur members with significant preferences. These findings constitute evidence on the potential adverse effects of regional trade arrangements on members and on third countries. Given the recent proliferation of RTAs, they highlight the need for further empirical research on the domestic and international effects of these arrangements, to better assess the pros and cons of regionalism.

Suggested Citation

  • Yeats,Alexander James, 1997. "Does Mercosur's trade performance raise concerns about the effects of regional trade arrangements?," Policy Research Working Paper Series 1729, The World Bank.
  • Handle: RePEc:wbk:wbrwps:1729
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    References listed on IDEAS

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    1. Drysdale, Peter & Garnaut, Ross, 1982. "Trade Intensities and the Analysis of Bilateral Trade Flows in a Many-Country World : A Survey," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 22(2), pages 62-84, February.
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    3. Daniel Chudnovsky & Andres López & Fernando Porta, 1998. "Intra-industry trade and regional integration: the case of the auto industry in Argentina," Chapters,in: The Handbook of Latin American Trade in Manufactures, chapter 7 Edward Elgar Publishing.
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    Citations

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    Cited by:

    1. Longo, Robert & Sekkat, Khalid, 2004. "Economic Obstacles to Expanding Intra-African Trade," World Development, Elsevier, vol. 32(8), pages 1309-1321, August.
    2. Salazar-Xirinachs, Jose M., 2002. "Proliferation of sub-Regional Trade Agreements in the Americas: an assessment of key analytical and policy issues," Journal of Asian Economics, Elsevier, vol. 13(2), pages 181-212.
    3. Sophie Chauvin, 2001. "Exit Options for Argentina with a Special Focus on Their Impact on External Trade," Working Papers 2001-07, CEPII research center.
    4. John Romalis, 2007. "NAFTA's and CUSFTA's Impact on International Trade," The Review of Economics and Statistics, MIT Press, vol. 89(3), pages 416-435, August.
    5. Nunnenkamp, Peter, 1997. "Mercosur und EU: institutionalisierte Kooperation als Stimulanz für Handel und Direktinvestitionen?," Open Access Publications from Kiel Institute for the World Economy 1737, Kiel Institute for the World Economy (IfW).
    6. Pacheco, Ricardo & Nunnenkamp, Peter, 1997. "Wirtschaftliche Integration auf Kosten peripherer Regionen? Chancen und Risiken für den brasilianischen Nordosten im Mercosur," Kiel Working Papers 827, Kiel Institute for the World Economy (IfW).
    7. Piotr Misztal, 2014. "Trade integration and business cycles synchronization of Poland (Integracja handlowa a synchronizacja cykli koniunkturalnych Polski i Unii Europejskiej)," Research Reports, University of Warsaw, Faculty of Management, vol. 1(17), pages 62-73.
    8. Simwaka, Kisu, 2010. "An Empirical Evaluation of Trade Potential in Southern African Development Community," MPRA Paper 15894, University Library of Munich, Germany.
    9. Terra, María Inés, 1998. "Uruguay en el MERCOSUR: perspectivas del comercio intrarregional," Oficina de la CEPAL en Montevideo (Estudios e Investigaciones) 28649, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    10. Jérôme Trotignon, 2001. "Brésil-Argentine : effets statiques et dynamiques de l'intégration commerciale," Post-Print halshs-00179978, HAL.
    11. DeRosa, Dean A., 1998. "Regional integration arrangements : static economic theory, quantitative findings, and policy guidelines," Policy Research Working Paper Series 2007, The World Bank.
    12. Azevedo, André Filipe Zago de & Massuquetti, Angélica, 2015. "Exports from the Brazilian automotive sector to the Southern Common Market: Trade diversion or cost reduction?," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), April.
    13. Shahid Yusuf, 2003. "Innovative East Asia : The Future of Growth," World Bank Publications, The World Bank, number 15158.
    14. Nunnenkamp, Peter, 1998. "Lateinamerika nach der verlorenen Dekade: Eine Zwischenbilanz der Reformen," Kiel Discussion Papers 324, Kiel Institute for the World Economy (IfW).
    15. Eduardo Levy & Federico Sturzenegger, 2000. "Is EMU a Blueprint for Mercosur?," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 37(110), pages 63-99.
    16. David M. Gould, 1998. "Has NAFTA changed North American trade?," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, issue Q 1, pages 12-23.

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