How Regional Blocs Affect Excluded Countries: The Price Effects of MERCOSUR

Won Chang and L. Winters

No 2179, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: The welfare effects of PTAs are most directly linked to changes in trade prices, i.e., the terms of trade. This paper employs a simple strategic pricing game in segmented markets to measure the effects of MERCOSUR on the pricing of 'non-member' exports to the region. Working with detailed data on unit values and tariffs we find that the creation of MERCOSUR is associated with significant declines in the prices of non-members' exports to the region and that these can be largely explained by tariff preferences offered to its partners. We focus on the Brazilian market (by far the largest in MERCOSUR) and show that non-members' export prices to Brazil respond to both m.f.n. and preferential tariffs, the latter inducing reductions in non-member export prices.

Keywords: Imperfect Competition; Mercosur; Regional Integration; Terms of Trade (search for similar items in EconPapers)
JEL-codes: C33 F13 F15 (search for similar items in EconPapers)
Date: 1999-06
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Citations: View citations in EconPapers (13)

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Related works:
Chapter: How Regional Blocs Affect Excluded Countries: The Price Effects of MERCOSUR (2015)
Chapter: How Regional Blocs Affect Excluded Countries: The Price Effects of MERCOSUR (2012)
Journal Article: How Regional Blocs Affect Excluded Countries: The Price Effects of MERCOSUR (2002)
Working Paper: How regional blocs affect excluded countries - the price effects of MERCOSUR (1999)
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