Advertisement

Economic Change and Restructuring

, Volume 46, Issue 3, pp 277–297 | Cite as

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

  • Pascal L. Ghazalian
Article

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.

Keywords

Agricultural commodities Gravity equation Latin America MERCOSUR Regional trade agreements 

JEL Classification

F13 F15 Q17 R19 

Notes

Acknowledgments

The author would like to thank two anonymous reviewers for providing valuable comments and suggestions, and the editor-in-chief, Professor George Hondroyiannis, for evaluating this study.

References

  1. Amjadi A, Winters LA (1999) Transport costs and “Natural” integration in Mercosur. J Econ Integrat 14(4):497–521CrossRefGoogle Scholar
  2. Anderson JE, van Wincoop E (2003) Gravity with gravitas: a solution to the border puzzle. Am Econ Rev 93(1):170–192CrossRefGoogle Scholar
  3. Bergstrand JH (1985) The gravity equation in international trade: some microeconomic foundation and empirical evidence. Rev Econ Stat 67(3):474–481CrossRefGoogle Scholar
  4. Bergstrand JH (1989) The generalized gravity equation, monopolistic competition, and the factor-proportions theory in international trade. Rev Econ Stat 71(1):143–153CrossRefGoogle Scholar
  5. Bojnec S, Fertö I (2012) Does EU enlargement increase agro-food export duration? World Econ 35(5):609–631CrossRefGoogle Scholar
  6. Bussière M, Fidrmuc J, Schnatz B (2008) EU enlargement and trade integration: lessons from a gravity model. Rev Dev Econ 12(3):562–576CrossRefGoogle Scholar
  7. Chang W, Winters LA (2002) How regional blocs affect excluded countries: the price effects of MERCOSUR. Am Econ Rev 92(4):889–904CrossRefGoogle Scholar
  8. Eicker F (1963) Asymptotic normality and consistency of the least squares estimators for families of linear regressions. Ann Math Stat 34(2):447–456CrossRefGoogle Scholar
  9. Feenstra RC (2004) Advanced international trade. Princeton University Press, PrincetonGoogle Scholar
  10. Food and Agriculture Organization Statistics (FAOSTAT) (2011) Price statistics. Retrieved March 17, 2011, from http://faostat.fao.org/site/570/default.aspx#ancor
  11. Frankel JA (1997) Regional trading blocs in the world economic system. Institute for International Economics, Washington, DCCrossRefGoogle Scholar
  12. Gardini GL (2011) MERCOSUR: what you see is not (always) what you get. Eur Law J 17(5):683–700CrossRefGoogle Scholar
  13. Ghazalian PL, Larue B, Gervais J-P (2011) Assessing the implications of regional preferential market access for meat commodities. Agribusiness Int J 27(3):292–310CrossRefGoogle Scholar
  14. Giordano P, Falconi C, Sumpsi JM (2007) Desarrollo rural y comercio agropecuario en América Latina y el Caribe. Inter-American Development Bank, Washington, DCGoogle Scholar
  15. Head K, Mayer T (2002) Illusory border effects: distance mismeasurement inflates estimates of home bias in trade. Working Paper No. 2002-01, Centre d’Études Prospectives et d’Informations Internationales (CEPII), Paris, FranceGoogle Scholar
  16. Jayasinghe S, Sarker R (2008) Effects of regional trade agreements on trade in agrifood products: evidence from gravity modeling using disaggregated data. Rev Agric Econ 30(1):61–81CrossRefGoogle Scholar
  17. Kaltenthaler K, Mora FO (2002) Explaining Latin American economic integration: the case of Mercosur. Rev Int Polit Econ 9(1):72–97CrossRefGoogle Scholar
  18. Korinek J, Melatos M (2009) Trade impacts of selected regional trade agreements in agriculture. Organization for Economic Cooperation and Development (OECD) Trade Policy Working Papers No. 87, OECD, Paris, FranceGoogle Scholar
  19. Krinsky I, Robb AL (1986) On approximating the statistical properties of elasticities. Rev Econ Stat 68(4):715–719CrossRefGoogle Scholar
  20. Krinsky I, Robb AL (1991) Three methods for calculating the statistical properties of elasticities: a comparison. Empiric Econ 16(2):199–209CrossRefGoogle Scholar
  21. Lai H, Zhu SC (2004) The determinants of bilateral trade. Can J Econ 37(2):459–483CrossRefGoogle Scholar
  22. Lambert D, McKoy S (2009) Trade creation and diversion effects of preferential trade associations on agricultural and food trade. J Agric Econ 60(1):17–39CrossRefGoogle Scholar
  23. Malamud A (2010) Latin American regionalism and EU studies. J Eur Integrat 32(6):637–657CrossRefGoogle Scholar
  24. Malamud A, Gardini GL (2012) Has regionalism peaked? The Latin American Quagmire and its lessons. Int Spectator 47(1):116–133CrossRefGoogle Scholar
  25. Marques H (2011) Asymmetries in heterogeneous integrated areas: evidence from sectoral trade between old and new EU members. J Int Trade Econ Dev 20(1):5–29CrossRefGoogle Scholar
  26. Martinez-Zarzoso I, Nowak-Lehmann DF (2003) Augmented gravity model: an empirical application to Mercosur-European union trade flows. J Appl Econ 6(2):291–316Google Scholar
  27. Martinez-Zarzoso I, Nowak-Lehmann DF (2004) Economic and geographical distance: explaining Mercosur exports to the EU. Open Econ Rev 15(3):291–314CrossRefGoogle Scholar
  28. Mayer T, Zignago S (2005) Market access in global and regional trade. Working Paper No. 2005-02, Centre d’Études Prospectives et d’Informations Internationales (CEPII), Paris, FranceGoogle Scholar
  29. Moncarz PE, Vaillant M (2007) MERCOSUR’s role on the regional patterns of imports of its country members: a dynamic panel data approach. Discussion Paper No. 07/27, School of Economics, University of Nottingham, UKGoogle Scholar
  30. Nowak-Lehmann DF, Martinez-Zarzoso I (2005) Mercosur-European union trade: how important is EU trade liberalization for Mercosur’s exports? Int Trade J 19(1):31–66CrossRefGoogle Scholar
  31. Papazoglou C, Pentecost EJ, Marques H (2006) A gravity model forecast of the potential trade effects of EU enlargement: lessons from 2004 and path-dependency in integration. World Econ 29(8):1077–1089CrossRefGoogle Scholar
  32. Santos Silva JMC, Tenreyro S (2006) The log of gravity. Rev Econ Stat 88(4):641–658CrossRefGoogle Scholar
  33. Sun L, Reed R (2010) Impact of free trade agreements on agricultural trade creation and trade diversion. Am J Agric Econ 92(5):1351–1363CrossRefGoogle Scholar
  34. The World Bank (2011) Treaty of Asunción. Retrieved March 17, 2011, from http://wits.worldbank.org/GPTAD/PDF/archive/MERCOSUR.pdf
  35. Viner J (1950) The customs union issue. Carnegie Endowment for International Peace, New YorkGoogle Scholar
  36. Whalley J (1998) Why do countries seek regional trade agreements? In: Frankel JA (ed) The regionalization of the world economy. University of Chicago Press, ChicagoGoogle Scholar
  37. White H (1980) A heteroskedasticity-consistent covariance matrix estimator and a direct test for heteroskedasticity. Econometrica 48(4):817–838CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media New York 2012

Authors and Affiliations

  1. 1.Department of EconomicsUniversity of LethbridgeLethbridgeCanada

Personalised recommendations