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Über dieses Buch

The essays included in this book are the result ofseven years ofresearch spanning the 1990-1997 period. Most of them have been published in scientific magazines or as chapters of books. To the end of this edition, and in order to avoid repetitions, the original texts have been modified, particularly with regard to the titles and introductions ofthe chapters. Chapter two reproduces the article "Economic Integration and Intra-Industry Trade: The Case of the Argentine-Brazilian Free Trade Agreement", published in the Journal of Common Markets (vol XXIX, No 5, pp. 527-552, sept. 1991). Chapter three originates from an empirical study prepared for UNIDO, the United Nations Industrial Development Organization. The analytical framework and the preliminary conclusions of that work appeared in a working paper "The MERCOSUR Pattern of Intra-Industry Trade" (RP No 75, Stockholm: LAIS, 1997). Chapter four was published with the title "Plant-size Effects ofTrade: The Case of MERCOSUR Countries" as a chapter of the book Growth Trade and Integration in Latin America (W. Karlsson and A. Malaki (eds. ), Stockholm: LAIS, pp. 297-319, 1996). Chapter five in tum corresponds to the article entitled "Measuring the Effects of Economic Integration for the Southern Cone Countries: Industry Simulations of Trade Liberalization" as published in The Developing Economies (Vol. XXXIII, No 1, pp. 1-31, mars 1995). Finally, chapter six is the revised and updated version of the paper presented at the First European Congress ofLatinamericanists, which took place at Salamanca, Spain in June 1996.

Inhaltsverzeichnis

Frontmatter

1. Introduction

Abstract
The studies collected in this book were written at different times and for varying purposes. However, each one, in its own way, is intended to shed light on a single issue, namely the economic rationale of the Southern Common Market (MERCOSUR [Mercado Común del Sur]). This is not an easy task since the reasons for the failure of Latin American integration attempts in the past are still not well understood and even less the dynamics of current processes. The case of LAFTA (Latin American Free Trade Association) - the largest and most ambitious integration program in the sixties and the seventies - is illustrative of the issue. Neither the long-term objective of completely eliminating trade barriers among the member countries, nor the more modest one of progressively widening the common list of tariff-free commodities was achieved. Today, different analysts agree that the failure of LAFTA was related to the misconception of economic integration among developing countries as embodied in the LAFTA agreement, namely its excessive emphasis on discriminatory practices and the elaboration of complex rules for promoting intra-regional trade. Other authors, however, contend that the main problem was the absence of mechanisms that could guarantee a more equal distribution of the gains and costs from regional trade liberalization.
Jaime Behar

2. Industrial Adjustment, Product Differentiation and Economies of Scale

Abstract
In July 1986, the governments of Argentina and Brazil announced the institution of a broad program of economic cooperation between the two countries (PICEAB [Programa de Integración y Cooperación Económica Argentina-Brasil]) which stipulated, among other objectives, the elimination of all barriers to reciprocal trade over a ten-year period. Successive negotiations brought the deadline for achieving zero tariffs on bilateral trade forward by five years. This chapter examines retrospectively the objectives and instruments established by the PICEAB, drawing on the arguments advanced in recent contributions to trade theory. The focus is on three related issues, namely the extent of the industrial adjustment which would follow the full liberalization of Argentine-Brazilian bilateral trade; the pre-integration level of intra-industry trade in manufactures; and the potential gains from product differentiation and economies of scale which would be produced by the PICEAB.
Jaime Behar

3. Patterns of Intra-Industry Trade

Abstract
From its start, MERCOSUR raised a number of questions about the distribution of the gains and costs of integrating. This was a highly problematic issue on which views diverged considerably. Scholars, for instance, usually approached it in the classic terms of trade creation and trade diversion. Policy-makers and economic actors in turn were rather concerned with the existence of large divergences in economic structure and policy among member countries. In practice, however, the two views pointed to the same issue, namely, the risk of an inefficient reallocation of resources and consumption. This risk was made evident on more than one occasion, when abrupt fluctuations in regional parities, due to divergencies in monetary and exchange policies, caused the trade pattern to deviate from the optimal one associated to tariff elimination. These distortions impacted allocative efficiency negatively by increasing inter-country disparities in firms’ competitiveness and unnecessarily amplifying the extent of industrial adjustment.
Jaime Behar

4. Plant-Size Effects of Trade

Abstract
Previous chapters focussed on MERCOSUR countries’ trade pattern and explained it in the light of theoretical approaches that emphasize the role of economies of scale and product differentiation. In the present chapter, the focus is on the opposite question, namely how trade can promote the fuller exploitation of economies of scale.
Jaime Behar

5. Cooperation and Competition Industry Simulations of Trade Liberalization

Abstract
The main purpose of this chapter is to investigate the effects of reciprocal tariff reductions for three of the four Latin American countries which form the MERCOSUR, namely Argentina, Brazil, and Uruguay. The study is conducted within the framework of the partial equilibrium model developed by Smith and Venables (1988). The model, which allows for economies of scale and trade in differentiated products, has previously been used to analyze the effects of the completion of the EC (Smith and Venables, 1988), the resource and welfare implications of Spain's access to the EC (Gual, Martinez Giral and Vives, 1989), and the likely effects of EFTA (European Free Trade Association) countries' joining the Community (Norman, 1989). It has also been applied to the study of optimal tariffs and subsidies for industrialized countries (Gasiorek, Smith, and Venables, 1989). As far as we know, the present study is the first attempt to apply the Smith-Venables model to data on developing countries. Next sections describe the model and the calibration procedure, makes some short comments on data-related problems and examine some basic issues of the simulations. Simulation results in terms of welfare and output changes are then reported and analyzed. They relate to two integration scenarios: one with a 50 per cent reduction in inrra-MERCOSUR tariffs and the other with a 100 per cent reduction. A comparison of the results from simulating Bertrand and Cournot firm behavior is also presented. The last section focuses on the problem of policy harmonization between
Jaime Behar

6. Economic Integration and Economic Divergence

Abstract
As it is evident from the previous chapter, discrepancies in the movement of real exchange rates can undermine the efforts of MERCOSUR countries for achieving the objective of a customs union. This evidently makes out a strong case for the harmonization of related policies. A more difficult question is whether convergence of economic performance, meaning a narrowing of disparities in growth rates and/or income levels over time, can in itself promote integration and, if so, whether it can be facilitated by coordination of macroeconomic policies. There is no such thing as a simple answer to this question. Students of the European experience, for example, have repeatedly referred to the circularity of the debate about the relationship between convergence of economic performance and integration. They point to the fact that divergence is a general and permanent feature of all complex economic systems and it should not necessarily be perceived as a bad thing in all instances (cf. Hodges and Wallace, 1981). Hence, there is no reason to equate integration with attaining homogeneity and neither to judge economic divergence as something negative in itself. Really, what is relevant is to define criteria for managing divergence rather than for eliminating it. In this chapter, we examine some aspects of this discussion in relation to the experiences of the MERCOSUR and Andean Group (GRAN) countries. We furthermore look at recent proposal to fuse these two trade blocs into a South American Free Trade Area (SAFTA).
Jaime Behar

Backmatter

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