Potential impacts of the Mercosur-EU agreement on the automotive value chains in Brazil and Argentina

Abstract

This paper investigates the potential effects of the Mercosur-EU agreement for the automotive value chains in Argentina and Brazil, identifying the trade balance movements of each partner. Its main results point to an improved trade balance in most automotive and auto parts products for the EU. Besides differences in international competitiveness, other factors prompt these results, such as differences in production scale between partners, greater tariff preferences granted by Mercosur, greater potential demand for vehicles in Argentina and Brazil than in the EU, higher regulation requirements on product and process quality in the EU market, among others.