Agricultural Exporters in a Protectionist World: Review and Policy Implications of Barriers Against Mercosur

Worldwide, the Mercosur countries are probably the ones that face the most hostile trading system. Their strong comparative advantage in temperate agricultural and agro-industrial products make them particularly vulnerable to the irrationally high and variable agricultural protectionism cum subsidies that continues to distort this trade. In retrospect the paper argues that signing the Uruguay Round Agreement on Agriculture was a kiss of death for the development prospects of these countries. Likewise, the continued expansion of regional policies and particularly that practiced by the EU, continues to reduce export earnings of Mercosur. The paper presents a selected survey of the literature as well as new estimates on these and other effects including the financial consequences that agricultural protectionism has on Mercosur; their ability to sustain and service their external debts. Based on the findings, the paper concludes with some policy suggestions which at best represent defensive opportunities. Nothing would boost more the development prospects of these countries than a comprehensive and ambitious multilateral agreement to reduce agricultural protectionism. Nevertheless given the highly protectionist stance of the US and EU, the prospects that this will materialize anytime soon are dim.