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

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

Document Type: Research Article

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

Publication date: 2013-11-01

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