Effects of a Preferential Trade Agreement between Mercosur and the European Union for Brazilian Agribusiness

Abstract

This study analyzes the impacts caused on the economy (production, trade and well-being) and on Brazilian agribusiness by a PTA between Brazil, via MERCOSUR and the EU. It should be noted that the simulations were carried out using the computable general equilibrium model and the GTAP 10 database and according to the classification of products by level of technological intensity in accordance with the OECD. Thus, two possible scenarios were adopted: the first adopted the total elimination of import tariffs, while in the second scenario the reduction was 50%. Thus, the results obtained show that, depending on the intensity of the tariff reduction, Brazilian agribusiness exports would increase, as these products have a greater competitive advantage, while the European bloc would expand production and exports of products with greater technological intensity. Welfare gains for Brazil occur with the total reduction of tariffs and the European Union would have greater gains in allocative efficiency by focusing on products with greater technological intensity. And the sensitivity analysis shows greater welfare gains for countries involved in the agreement to the detriment of non-involved regions.