South American Regionalism - Assessing the Impact on Trade

Sammanfattning: Abstract This study examines the impact the Andean Community and Mercosur have had on the respective member countries’ trade. Through the use of the gravity model the effects on trade from regional integration in South America are assessed. After a long period of economic isolation the South American nations began a process of reintegration into the world economy in the 1980s. Alongside an overall trade liberalization a process regional integration led to the reinvigoration of the Andean Community and the creation of Mercosur in the 1990s. Since then intra-bloc imports have increased substantially in the Andean Community and Mercosur and the degree of intra-bloc imports are in both cases found to be more intense than what can be explained by natural determinants of economic interaction. A positive impact on trade from regional integration is established. A comparison between the two regional trading agreements find the Andean Community to be relatively more trade creating than Mercosur during the 1990s, while by 2004 the relationship is the opposite. These findings are ascribed to the earlier start of the Andean Community while the relatively deeper integration process of Mercosur has by 2004 produced greater effects on trade.