Section 71
Chapter 70,699

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

Liu, B.; Devadoss, S.

Applied Economics 45(32): 4474-4486


ISSN/ISBN: 0003-6846
DOI: 10.1080/00036846.2013.788786
Accession: 070698902

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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