The Trade Effects on the Non-Member Countries of the Regional Integration: The Case of the Mercosur
Bibliographic record
Abstract
The effects of the regional trade bloc on non-member countries are examined. Using the case of Mercosur, we examine the trend of intra-regional trade flows and of extra-bloc trade flows with the selected two countries, Canada and U.S., after formation of Mercosur in 1991. After employing the trade intensity indices of non-members, which controls for the overall growth in members' trade relative to world trade, we find that the remarkable growth of the intra-regional trade of Mercosur has been accompanied by simultaneously increasing trade flows with non-member states such as Canada and U.S. 1. Introduction Regional trade agreements have become much more popular during the last decade. Along the continental lines, the North American Free Trade Agreement (NAFTA) and the Common Market of the Southern Cone (Mercosur), involving Argentina, Brazil, Paraguay and Uruguay, were created in the Americas, while the ASEAN Free Trade Area (AFTA) was formed in 1992 in Asia. In Europe, the European Union (EU) and the European Free Trade Association (EFTA) finalized their membership after Sweden, Finland and Austria withdrew from EFTA to join the EU in 1995. Between 1990 and 1997, according to Chang and Winters (1999), 87 regional agreements were notified to the WTO. At present, almost all WTO members belong to at least one regional arrangement.1 With regard to the growth in importance of regional trading bloc, two issues have been raised in the literature. One is the question of what would happen to world welfare if the world economy could become fragmented. Another issue is whether the regional trade blocs contribute to further trade liberalization with non-members countries or undermine it. On the welfare impact of the formation of regional trading blocs, Kemp and Wan (1976), for example, show that if countries form into trading blocs by eliminating the barriers to internal trade and imposing a set of common external tariffs (CET) on imports from all countries outside the bloc, the welfare of the union as a whole improved and that of the rest of the world did not fall. Krugman (1991), on the other hand, has developed a simple economic model to conclude that world welfare is not maximized unless the number of blocs is either one or very large. He suggests that world welfare is generally minimized especially when there are three blocs. Although Krugman's model ignores transport costs, Frankel, Stein and Wei (1995) show that world welfare could be reduced for certain values of inter-continental transport costs even if blocs are formed along continental lines. It has been also controversial whether the regional arrangements help or hinder multilateral liberalization. Baldwin (1995), among others, suggests that the formation of a trade bloc can have a domino effect. As regional integration increases, excluded countries will lose competitiveness and seek to join the bloc. If the bloc enlarges, the cost to the non-members increases since they face a cost disadvantage in an even greater number of markets. This second round effect will lead to further enlargement of the regional trading bloc. Krishna (1998), however, employs an oligopolistic model to show that when regional blocs foster trade diversion, in which efficiently produced goods from outside blocs are replaced by inefficiently produced goods inside, each member of the bloc will undermine its incentive to liberalize trade with the rest of the world. Many, including Bhagwati (1993) and Nagarajan (1998), attribute the negative side of regional trade blocs on nonmember countries to ambiguity of the rule governing regional arrangements of the WTO. Article XXIV of the GATT requires that when a group of WTO members form a regional arrangement among themselves, the arrangement must not raise the tariffs applicable on imports from third countries. It is not clear, however, whether the term applicable refers to bound or to applied tariff rates. …
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How this classification was reachedexpand
Full frame distilled prediction
Teacher imitationNot calibrated prevalence, not ground truth. Human validation pending. Learned from the 10,348 direct Codex labels and 10,348 direct Gemma labels. Candidate is the union of thresholded teacher heads; consensus is their intersection. These outputs are machine_predicted_unvalidated and are not human labels or direct frontier model labels.
Codex and Gemma teacher scores by category
| Category | Codex | Gemma |
|---|---|---|
| Metaresearch | 0.001 | 0.001 |
| Meta-epidemiology (narrow) | 0.000 | 0.000 |
| Meta-epidemiology (broad) | 0.000 | 0.000 |
| Bibliometrics | 0.000 | 0.000 |
| Science and technology studies | 0.001 | 0.000 |
| Scholarly communication | 0.000 | 0.000 |
| Open science | 0.001 | 0.000 |
| Research integrity | 0.000 | 0.000 |
| Insufficient payload (model declined to judge) | 0.000 | 0.000 |
Machine scores (provisional)
The two teacher heads of the student model, read on this work. A score orders the frame for review; it never asserts a category, and the validation status ships verbatim with every row.
Baseline scores from an immature model (maturity gate not passed, 7 training rounds). Scores rank; they never assert a category.
score_only:v0-immature-baseline · verbatim from the scoring run: score_only means the number may rank works, and no category label ships from itClassification
machine, unvalidatedMachine predicted; a candidate call from one teacher head, not a consensus.
How this classification was reached, model by model and score by score, is at the end of the page under "How this classification was reached".