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Mercosur and the U.S.: an International General Equilibrium Evaluation of the Regional Integration

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  • Diao Xinshen
  • Somwaru Agapi

Abstract

A dynamic general equilibrium model is constructed to analyze the effects of the Southern Common Market (MERCOSUR) on the member countries as well as on the U.S. economy. By taking into account dynamic adjustments, we find that while the effects of MERCOSUR on its member countries' investment, consumer welfare and national product are positive, the respective effects on the U.S. economy are negative. Such negative effects are small, as U.S.-MERCOSUR trade shares with respect to U.S. total trade are quite small. When MERCOSUR additionally adopts its common external tariff policy, growth in MERCOSUR's total trade implied an increase in trade between MERCOSUR and other countries. In this case, both MERCOSUR member countries and the U.S. are better off. [C68, F11, O41]

Suggested Citation

  • Diao Xinshen & Somwaru Agapi, 1999. "Mercosur and the U.S.: an International General Equilibrium Evaluation of the Regional Integration," International Economic Journal, Taylor & Francis Journals, vol. 13(1), pages 27-93.
    • Handle: RePEc:taf:intecj:v:13:y:1999:i:1:p:27-93
    DOI: 10.1080/10168739900000027
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    Cited by:

    1. Dean A. DeRosa & John P. Gilbert, 2005. "Predicting Trade Expansion under FTAs and Multilateral Agreements," Working Paper Series WP05-13, Peterson Institute for International Economics.

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