Regional Trade Agreement, Global Trade Implications: EU-Mercosur Agricultural Trade Liberalization

We examine the impact of EU-Mercosur trade liberalization on bilateral trade patterns, both among exporting countries within these trade blocs and with their competitors. We focus in particular on the sensitivity of U.S. agricultural exports to expanded access for Mercosur in the European Union and for the European Union in Mercosur. We find that the U.S. market share is particularly sensitive to such an agreement to the extent that it lowers the trade costs faced by Brazilian and Argentine exporters in E.U. markets. U.S. market share is also vulnerable to increased access for Spain and Italy, but to a much lesser degree.