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10/09/2021 09:36

Publicação Preliminar - 2021 - Setembro

Economic Impacts of a Free Trade Agreement Between Mercosur and the United States: A general equilibrium approach


Authors: Fernando J. Ribeiro and Alicia Cechin


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This paper aims to analyze the economic effects of an FTA between the US and Brazil – in fact, the US and Mercosur, as it´s a customs union – using the computable general equilibrium model GTAP (Global Trade Analysis Project). The simulation considers two different scenarios, one with a 100% reduction in tariffs and a second one with the same tariff reduction and also a nontariff barrier reduction of 25% for all sectors.

In terms of the main macroeconomic variables, the results are generally positive for both countries, but the gains are higher in scenario 2. The welfare gains are also much more significant in scenario 2. It shows that a trade agreement with Mercosur focused on tariff reductions would not be interesting for the US, and also of low interest for Brazil. Hence, it´s necessary that any agreement include provisions aimed at reducing non-tariff barriers.

The sectoral analysis shows that the sectoral effects in the US are a mirror image of the ones in Brazil, in terms of winning and losing sectors; the effects are of little relevance in scenario 1, and more significant in scenario 2, especially for Brazil, revealing the importance of NTBs; and there´s not a clear sectoral pattern of gains and losses, unlike other FTA simulations involving Brazil and countries like China, India and the European Union, in which Brazilian gains are concentrated in commodity-producing sectors, mainly the ones related to agriculture, and losses would be associated to labor-intensive and technology-intensive sectors.

Keywords: International trade; trade integration; general equilibrium; Brazil; United States.



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