A Customs Union with Multinational Firms: The Automobile Market in Argentina and Brazil

Irene Brambilla

No 11745, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper looks empirically into the behavior of multinational firms in international oligopolistic markets with trade balance constraints. I show how a particular form of non-tariff barrier applied at the firm level can lead to an increase in trade flows in the presence of intra-firm strategic trade. In my application, I estimate a model of demand, supply and trade policy in the automobile sector in Argentina and Brazil during 1996-1999. I measure the economic impact of a trade balance constraint that was in effect during that period and I compute predicted economic outcomes for the full adoption of a customs union, as has been agreed as part of the Mercosur negotiations, separating the sometimes opposing impacts of the removal of non-tariff barriers and the adoption of a common external tariff. Results show that the elimination of non-tariff barriers dominates the leveling of tariffs. Imports from outside of Mercosur increase under the new regime even though tariffs against these goods become more discriminatory, and exports from Brazil to Argentina decrease once the trade balance constraint is removed.

JEL-codes: F12 F13 F15 (search for similar items in EconPapers)
Date: 2005-11
New Economics Papers: this item is included in nep-cse and nep-int
Note: ITI IO
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Working Paper: A Customs Union with Multinational Firms: The Automobile Market in Argentina and Brazil (2005)
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