MERCOSUR: Asymmetries and Strengthening of the Customs Union: Options for the Common External Tariff

Jan 2005
The enforcement of the MERCOSUR as an imperfect customs union is determined by the existence of a Common External Tariff (CET) which has not been fully applied up to this moment. The smallest countries in the MERCOSUR are more open, more specialized and a larger share of their total trade is intrabloc. Their integration to the MERCOSUR deeply affected their external relations and their output composition. On the contrary, for the largest countries, especially Brazil, their integration to the MERCOSUR has had much less impact on production and trade. The objective of this paper is to assess the effects on each of the MERCOSUR countries of different options for the CET. More precisely, the welfare effects and the impact on economic activities of several options are assessed for each of the MERCOSUR countries, using a computable general equilibrium (CGE) model.