The EU-Mercosur agreement: An in-depth analysis of CO2 emissions and labor market results

Maria C. Latorre, Hidemichi Yonezawa and Zoryana Olekseyuk

No 333488, Conference papers from Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project

Abstract: The EU-Mercosur agreement has raised a hot debate, particularly due to its potential environmental effects. We estimate its impact using a Computable General Equilibrium (CGE) model with 41 sectors-4 factors-6 region (EU27, Brazil, Argentina, Paraguay, Uruguay and ROW), which has three advanced features: 1) Climate of competition à la Melitz (2003) in various manufacturing sectors, which allows us to grasp productivity effects related to trade; 2) Foreign multinationals in advanced service sectors, operating à la Krugman (1980), which is suitable to grasp multinationals’ behavior; 3) CO2 emissions across sectors and regions. Our results point out that this agreement is a “win-win” for its signatories. Everyone wins, but the impact will be more visible in the Latin American side. Our analysis of the total imports of the EU27 shows that this agreement allows the Mercosur countries to export products in which they have a comparative advantage, while moving their export basket towards more complex products. It also allows the European side to improve its specialization in more complex sectors. For year 16, i.e., after 15 years of implementation, the agreement generates a small increase (0.14%) in CO2 emissions by the EU-Mercosur region which, however, translates into an improvement in the emissions/GDP ratio of the EU-Mercosur region (0,17% GDP increase). The improvement in the emissions/GDP ratio also holds for the world as a whole.The impacts we derive are generally larger and more positive than the ones in the literature. This is firstly because our modeling includes components of the final agreement reached (Agreement in Principle of June 28, 2019) that, to our knowledge, have not yet been included in most previous studies, such as Foreign Direct Investment (FDI) in services and government procurement.

Keywords: Environmental Economics and Policy; International Relations/Trade (search for similar items in EconPapers)
Pages: 25
Date: 2022
New Economics Papers: this item is included in nep-des, nep-ene, nep-env and nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://ageconsearch.umn.edu/record/333488/files/11026.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ags:pugtwp:333488

Access Statistics for this paper

More papers in Conference papers from Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project Contact information at EDIRC.
Bibliographic data for series maintained by AgEcon Search ().