Winners and Losers in a Free Trade Area between the United States and MERCOSUR

The paper focus on the characteristics of the political economy of an FTA of this kind. With this objective, they develop a methodology that allows them to study the welfare effects of a bilateral agreement by identifying the sectors that would encounter the most problems and those that would be most favored by a trade agreement. A general typology of the changes under different protection regimes in an eventual free trade area between the United States and MERCOSUR is developed (enhanced protection versus reduced protection and trade diversion versus trade creation). This methodology utilizes data on trade and production, and it allows the typology of goods in each of these categories to be determined empirically. The work is carried out at a high level of disaggregation so as to be able to identify the reciprocal sensitive sectors. The results constitute an objective base for analyzing the lists of exceptions that the trade agreement would entail