The Formation of FTAA, MERCOEURO and its Probable Impacts on the Brazilian Coffee Export to the United States and the European Union

Abstract

Trade liberalization is an essential requirement for the increase of trade between nations, providing numerous gains to the involved countries, due to the reducing of trade barriers, which can change price behavior. In the 1990's, Brazilian trade integration followed the world's new standard context, based on the so-called New Regionalism, which is characterized by the countries' integration through both bilateral and multilateral deals. The purpose of this work is to analyze the impacts of a hypothetic formation of Free Trade Area of the Americas (FTAA) and the union between Southern Common Market (MERCOSUR) and European Union (EU), MERCOEURO, in respect of the Brazilian green coffee exportations to the United States of America and the European Union, from 1999 to 2006. For this purpose, the partial equilibrium model developed by Laird and Yeats [12] was used, since it measures trade creation and trade diversion after the institution of those blocs. This study shows us that the effects of the formation of FTAA and MERCOEURO had positive effects on the Brazilian coffee exports.