The EU-Mercosol free trade agreement: quantifying mutual gains

Abstract

We identify trade in goods opportunities in a EU-Mercosul free trade area. Gains for Mercosul are rather concentrated, being mostly associated with a few agricultural commodities which face high protection barriers. EU gains are evenly spread, comprising a variety of market penetration possibilities. Trade deviation in the EU products is never higher than trade creation, confirming their international competitiveness and signalling that no great distortion of Mercosul's imports will take place. Balanced gains exist for both sides. For Mercosul, the agreement would act as a first serious trial for future liberalizations with other developed partners and as a warning on improvements in competitiveness.