Effects of trade diversion and trade creation of MERCOSUR on US and world apple markets

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Abstract:

Apples are the third most valuable fruit in the United States and account for 18% of US fruit exports. Chile is a major competitor to the United States in the MERCOSUR market, since it is one of the leading apple producing countries and enjoys the tariff reductions as a member of MERCOSUR. Consequently, Chilean exports displace US exports in MERCOSUR. In addition, other MERCOSUR members import more from lower-cost Chile, leading to a reduction in production and an increase in consumption in these countries. This study develops a theoretical and an empirical model of world apple market to quantify the trade diversion and trade creation effects of the MERCOSUR free trade agreement and to estimate the welfare impacts.

Keywords: F13; F15; MERCOSUR; apple; trade creation; trade diversion

Document Type: Research Article

DOI: http://dx.doi.org/10.1080/00036846.2013.788786

Affiliations: Department of Agricultural Economics, University of Idaho, Moscow, ID, 83844–2334, USA

Publication date: November 1, 2013

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