European Market for Mercosur Agricultural Exports: An econometric study of commodity trade flows

The European Union (EU), which represents one of the world’s largest markets for raw materials and agricultural products, with imports of more than €113 billion in 2015, is a particularly attractive and very sought-after market for Mercosur exporters. This paper provides new evidence on income and price elasticities of demand for agricultural exports from Mercosur countries to the EU. The econometric analysis of the study is conducted with a sample of annual data which covers Mercosur’s major commodity exports to the EU from 1988 to 2015.The results indicate that for the eight commodities analysed there is a relatively weak demand response to income and price changes in the EU. The policy implication is that trade policy measures in the form of tariff and non-tariff barriers are not very significant in changing the quantity of imports demanded. However, the results suggest that relative-price variations affect significantly the demand for Mercosur agricultural exports, implying that the exporter’s market share is influenced by price competitiveness