, Volume 46, Issue 3, pp 277-297

MERCOSUR enlargement: predicting the effects on trade in primary agricultural commodities

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Abstract

This article estimates the effects of a hypothetical enlargement of the Mercado Común del Sur (MERCOSUR), depicted by granting MERCOSUR associate member countries a full membership status, on trade in primary agricultural commodities. The empirical investigation is implemented through the multiplicative form of the gravity model. The estimated gravity parameters are used to carry out scenarios that predict the effects of MERCOSUR enlargement on trade in primary agricultural commodities. The predictions reveal that MERCOSUR enlargement would generate significant increases in exports from the full members to the associate members. The predictions also show relatively smaller increases in exports from the associate members to the full members (in value terms), but some important increases in trade among the associate members. Trade diversion effects of MERCOSUR enlargement, which influence trade between full members and from non-member countries to full and associate members, are found to be limited.