Trading Away Development: Context and Prospects of the EU-Mercosur Agreement

Jeronim Capaldo and Özlem Ömer Cender

International Journal of Political Economy, 2025, vol. 54, issue 1, 46-88

Abstract: When assessing the economic effects of a new free trade agreement, projections with Computable General Equilibrium models have long been considered the gold standard. However, these models are usually constructed in a way that excludes negative outcomes on employment, inequality and economic development. Alternatively, simpler statistical analysis may be more informative. In this article, we take up the proposed EU-MERCOSUR agreement as an example and propose a method that can be easily replicated to analyze the sector-level composition of the participating economies and the implications for growth, employment, inequality and development. Our analysis points to the emergence of dual economies in most countries, low productivity, and low-wage sectors expanding too fast, a trend that can be aggravated by trade liberalization.

Date: 2025
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DOI: 10.1080/08911916.2025.2464973

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