Redalyc.EU-MERCOSUR Trade Agreement: Finding Winners Products for Paraguay

Revista de la Facultad de Ciencias Agrarias ISSN: 0370-4661 [email protected] Universidad Nacional de Cuyo Argentina

Enciso Cano, Víctor; Castillo Quero, Manuela; De Haro Giménez, Tomás EU-MERCOSUR trade agreement: finding winners products for Paraguay Revista de la Facultad de Ciencias Agrarias, vol. 49, núm. 2, 2017, pp. 289-302 Universidad Nacional de Cuyo Mendoza, Argentina

Available in: http://www.redalyc.org/articulo.oa?id=382853527020

How to cite Complete issue Scientific Information System More information about this article Network of Scientific Journals from Latin America, the Caribbean, Spain and Portugal Journal's homepage in redalyc.org Non-profit academic project, developed under the open access initiative EU-MERCOSURRev. FCA UNCUYO. trade 2017. agreement: 49(2): 289-302. Finding ISSN winnersimpreso 0370-4661. products for ISSN Paraguay (en línea) 1853-8665.

EU-MERCOSUR trade agreement: finding winners products for Paraguay

Acuerdo comercial EU-MERCOSUR: identificando los productos ganadores del Paraguay

Víctor Enciso Cano 1, Manuela Castillo Quero 2, Tomás De Haro Giménez 2

Originales: Recepción: 07/09/2016 - Aceptación: 12/12/2016

Abstract

The European Union (EU) and the Southern Common Market (MERCOSUR) have been negotiating a Regional Association Agreement (RAA) since the mid-nineties. This paper aims to identify products at the level of sub-headings of the Harmonized System indicators combined with trade statistics from 2010 to 2012. A total of 61 subheadings which would benefit from the signing of the agreement. The methodology used trade were identified with potential to increase its exports to the EU with the agreement. At product.first glance When they this reproduced product was the not traditional considered pattern an important of exports number from of the manufactures MERCOSUR countries, a high concentration in agrifood products due to high exported value of one paperwere identifiedfocused on as tariffs; having therefore potential further to increase research their on exportsnon-tariff to measures the EU. This for market finding accessshowed is a a potential must. to decrease the dependence on primary or raw material exports. The

Keywords

EU • MERCOSUR • Paraguay • trade indicators • agrifood

1 Facultad de Ciencias Agrarias. Universidad Nacional de Asunción. Ruta Mcal. [email protected]

Estigarribia Km 10,5. San Lorenzo-Paraguay. 2 Universidad140014 Córdoba. de Córdoba-Departamento: Economía, Sociología y Política Agrarias. Campus universitario de Rabanales, Edificio Gregor Mendel, 3° Planta,

Tomo 49 • N° 2 • 2017 289 V. Enciso Cano, M. Castillo Quero, T. De Haro Giménez

Resumen

La Unión Europea (UE) y el Mercado Común del Sur (MERCOSUR) se hallan negociando la firma de un Acuerdo de Asociación Regional (AAR) desde mediados de los noventa. Esta investigación buscó identificar productos a nivel de sub-partidas del Sistema Armonizado que serían beneficiados con la firma del acuerdo. Se utilizaron indicadores de comercio exterior y de barreras comerciales, combinados con estadísticas de comercio del período 2010-2012. Se identificaron 61 sub-partidas con potencial para altaincrementar concentración sus exportaciones en productos a EUagroalimentarios con la firma del debido AAR. A apesar un producto de que los con productos elevado reprodujeron el tradicional patrón de las exportaciones de los países del MERCOSUR, valor de exportación que sesgaba los resultados. Cuando se ignoró este producto un materiasimportante primas. número El trabajode manufacturas utilizó aranceles, fue identificado, por lo cual lo quese precisa muestra más la investigaciónexistencia de peropotencial focalizando para disminuir en requisitos la dependencia no arancelarios en la para exportación acceso al demercado. productos primarios o

Palabras clave - mentos Unión Europea • MERCOSUR • Paraguay • indicadores de comercio exterior • agroali

Introduction

The European Union (EU) and the South Common Market (MERCOSUR) have been negotiating a Regional Association withfor Paraguay.conclusions Then and some methodology, suggestion main for Agreement (RAA) since mid-nineties. furtherfindings studies. and discussion follow, to end In September of 2004, following the Economic integration negotiation was suspended. Years later, The economic analysis on impacts inexchange 2010, negotiationsof market access were proposals, restarted. theSo of commercial agreements started with far an agreement has not been achieved. the theory of custom unions, the seminal Recently, in 2016 new market access work of (21). Up to then the analysis was done using the same methodology The aim of this paper is to identify applied to support free trade, being productsproposals at were a 6 exchanged.digit level (sub-headings) Ricardo´s comparative advantages and of the Harmonized System currently being factor endowment of Heckscher-Ohlin, by the implementation of the agreement. effects of economic integration on the Followingexported by this Paraguay background that would there benefit are the most common. Viner identified two sections on commercial integration, one positive called trade creation and a impact evaluation methods, and a brief negativeproduction one and known the as commercial trade diversion. flows, summary of the very few impact studies of the agreement that include results effects. Trade creation refers to a situation They are classified as static or short runs

290 Revista de la Facultad de Ciencias Agrarias EU-MERCOSUR trade agreement: Finding winners products for Paraguay in which two countries begin to trade level, the most aggregated of all, includes with each other due to the elimination quantitative models such as computable or reduction of border restrictions. The general equilibrium models (CGE). new situation with reduced prices stimu- The second level includes the use of lates consumption of goods and therefore trade and commercial barriers indicators. Sectorial studies are considered country. Trade creation encourages the the most disaggregated level (20). properincreases allocation production of economicin the more resources, efficient boosts general welfare by means of methodology by means of two criteria. specialization and enhances trade Piermartini, R. (2005), classifies the between the partners. Trade diversion occurs when one country within a custom The first takes into account the time union begins to import a good from the inof trade the evaluation policy and and its canfuture be impacts ex-ante on or new partner, when previously it used aex-post. set of economics Ex-ante simulates variables. theIt answers change to import the same good from a third country. This country is no included in evaluation, on the other hand, is applied the union, therefore its product faces aftera "what the if"commercial type of question. agreement An ex-postimple- border restriction and hence is more mentation. Therefore uses historical data. Most econometric models are of this type. the custom union. Once the custom union The second criterion considers isexpensive implemented relative trade to the divers new partnerfrom the in whether the approach would be sectorial former source outside de union to a new or would cover the entire economy. source within the union. Later, Meade and The former uses partial equilibrium Lipsey (13, 16) substituted the Vinner´s analysis and the latter a general equilibrium assumption that goods were consumed in analysis. UNCTAD (2012) proposes the stated that relative prices changed due statistics and trade and commercial thefixed increase proportions in imports by relative and consumption, prices. They barriersfollowing indicators; classification: (ii) simulation i) Descriptive models and price reduction following integration including partial and general equilibrium; favored consumption. This was called and (iii) econometrics models such as gravitational models. commercial agreement. Impact assessments of trade agree- trade expansion. It was a third effect of ments are commonly conducted using be positive or negative depending on the computable general equilibrium (CGE). magnitudeThe final of effect the positive of the integration effects, creation could General equilibrium models consider the interrelationships between the various effects, trade diversion (17, 18). sectors that make up the economy. They and expansion of trade, and of the negative are most appropriate to analyze the effects Methodologies for assessing trade of trade liberalization since they assume agreements that markets are not isolated but intercon- nected (15, 18). Their results are estimates methodologies used to evaluate the impact of aggregate effects, which can provide an of Theyfree trade are manyagreements. ways toCEI classified(2003a) overall idea of the effect of integration. groups them in three stages based on A description of the major studies of the the aggregation levels of products. First effects of an FTA between the EU and

Tomo 49 • N° 2 • 2017 291 V. Enciso Cano, M. Castillo Quero, T. De Haro Giménez

MERCOSUR can be found in Boyer (2010) be one of the reasons. However, they and Burrell (2011). Modeling studies using partial equilibrium are scarce. This of products at a high level of disaggregation.are quite Trade useful indicators in the (specialization, identification product or sector ignoring the interaction complementarity, revealed advantages, withmay beother because markets they focusthat are on aassumed specific etc.) are very useful descriptive tools for constant (ceteris paribus). Not considering analysis of trade agreement impacts at interconnection between markets ignores the level of individual products (1, 9). the fact that increase in production in When general equilibrium models as well one sector means that resources must as trade indicators use data of similar be removed or transferred from other period, the results are comparable but at a different disaggregation levels (9) found more suitable for analysis of sectorial policiessectors. or Partial sectors equilibrium that are a small models fraction are running a CGE model were very similar of total economy (18). tothat ones impact obtained results withon Argentina's trade indicators, exports Two are the most representative studies but with a different disaggregation. Trade with these models related to EU-MERCOSUR agreement. Weissleder et al. (2008) evaluated levels, while CGE did so in large sectors. indicatorsThe conclusion identified stated products that "in at almost 6-digit The other belongs to Burrell (2011), all sectors where the CGE model showed the agreement, using the CAPRI model. a notable change in the sales, indicators - callywho alsoin the used agricultural CAPRI tosector. simulate Overall, the subheadings with opportunities in the bothimpacts of themof changes agree inthat trade EU policy,imports specifi from EUand or commercialthreatened of barriersdisplacement identified from MERCOSUR would increase once the agreement is implemented. Knowing the consequences of the There are also studies using gravity agreementthe Brazilian at product market bylevel EU's (6 digits) exports". is as important as to know its impact on the estimated the sensitivity of a group global economy. Furthermore, information productsmodels. Forimported example by Castillothe EU (2001)from at those two levels is complementary. MERCOSUR assuming reduction in Trade negotiations are basically a border protection by the former. Thus the Market access proposals are made at the highestprocess level of tariff of disaggregation concessions exchange.using the authors identified products that would get Harmonized Commodity Description and greater benefit from trade liberalization. Coding System, also known as the Harmo- BittecourtBalaguer (2000)et al. (2006), identified focused the on factors nized System (HS). Therefore the trade attractingthat most foreign influenced direct bilateral investment trade. information provided by the CGE models while researched on the determinants of needs to be complemented with more detailed data, such as products at a 6-digit the MERCOSUR and the EU (11). manufacturesStudies ofcommercial the EU-MERCOSURflows between agreement by means of trade indicators thatlevel in (10). a free For trade example, situation Kirkpatrick between are not a common feature in the literature. the(2008), EU and using MERCOSUR, a model of the CGE sector identified with Their mathematical simplicity could

the greatest growth in exports would be

292 Revista de la Facultad de Ciencias Agrarias EU-MERCOSUR trade agreement: Finding winners products for Paraguay

"processed food". This is an aggregated oil, and tanned/crust hides and skins level formed by processed beef, vegetal oils and fats, dairy products, processed concentrated in primary agriculture rice, sugar, beverage and tobacco. Only productsof bovine. rather Paraguay than manufactures. had its advantages beef and vegetal oils and fats include some Kirpatrick (2012) conducted a study 100 sub-headings. This aggregate charac- of the economic, social and environ- teristic of the CGE data limits the identi- mental impact that could results from the implementation of the agreement - both in the European Union and MERCO- ators,fication as of well sensitive as policy and especial makers, products require SUR's countries. The study concluded that informationamong the exporting at the goods.most disaggregatedTrade negoti level, which cannot be provided by the growth (2.5%) among the fourth countries CGE models for their data base are of inParaguay the MERCOSUR. would have the greatest GDP aggregated products (14). According to the authors, the food sector The required level of details can be achieved using trade indicators. Trade (73%), followed by animal products (36%) indicators provide results for products andwould grains experience (13%). the Manufactures largest development, would as they are currently traded discover reduce their growth the most, but since their tariff structure and identify special their weight in the total output was quite concessions offered to the counterpart in small, the negative impact was marginal. the negotiation. greatest increase (42%), because a large Assessments of EU-MERCOSUR Paraguayan exports would have the Agreement and Paraguay (92% on average) when entering the EU The impacts of the RAA have been market.percentage Therefore of its exports tariff reductionfaced high wouldtariffs aggregate impacts for the larger economies ofextensively the MERCOSUR, studied withArgentina emphasis and onBrazil. the thelead connected to an important sectors. increase of Paraguay's To date and according to the information exportsThe greatestto the EU, rise as would well as be the in processed output of gathered by the authors, the main impact food. At the same time there would be an

(1, 6, 7, 12). ALADI (2002), combined agricultural products as they become inter- twostudies indicators with of results trade (intensity on Paraguay and trade are mediateimportant inputs reduction for the in processed the export goods. of raw Boyer (2010) modeled the impact of systems, the Harmonized System and the the Agreement on a full liberalization complementarity) and two classification scenario and, another where sensitive

Standard International Trade Classification. sensitive products were minerals, The paper aimed at the identificationnd products were excluded. MERCOSUR¨s of Latin American exports that could electronic equipment, and for the EU rice, be displaced by European exports, a meattextiles, and leather meat products, dairymachinery products, and totalof Latin of 57 American products at exports 6 digit withlevel tradewere beverages and tobacco. expansion opportunities in the EU. A market, the most important being wheat, had the highest percentage growth of bovineidentified meat, with woods, opportunities tobacco, in peanuts, the EU productionThe results in both showed scenarios. that Lightweight Paraguay manufactures (meat, vegetable oil, milk, and soybean meal, sunflower and soybean Tomo 49 • N° 2 • 2017 293 V. Enciso Cano, M. Castillo Quero, T. De Haro Giménez

were from World Bank's WITs (World clothing, leather, wood and paper) were Integrated Trade Solutions), while data on sugar, beverages and tobacco, textiles and- tariffs and other trade barriers were from the World Trade Organization Data Base. the fastest growing sector, more specifi The Harmonized Commodity 11%,cally meatthey andwould sugar. increase Although by Paraguay'smore than Description and Coding System generally 100%exports to tothe MERCOSUREU, mainly due would to meat drop and by referred to as "Harmonized System" or sugar growth. Burrel (2011) simulated the just "HS" was used. impact of the agreement on EU imports from The methodology had three stages. The a general equilibrium model (GLOBE) 1 to estimateMERCOSUR the ineffects five on scenarios. the whole They economy, used first one was called filtering. It deleted out 2 1,000of the USD, exported as well list as those those productsnot subject with to to estimate the effects on the agricul- anyan average border exportrestriction value such equal as orad belowvalorem of turaland partialsector. equilibrium model (CAPRI) The CGE model showed increases in or combination. EU's imports from MERCOSUR although in tariffThe or reasoningsome kind behindof specific was tariff, that quota,if the different magnitudes. The partial equilibrium model showed despite facing trade barriers, the proba- that European imports would increase in product had been exported to the EU with the advantages of the agreement. If bility to increase its exports was greater all categories except oilseeds. The study EU, reducing border barriers could boost identified beef as the main imported the product had not been exported to the product by the EU from Paraguay. products had already entered the EU free Methodology ofexports tariff, to there that market.were few In concessionsaddition, if the to negotiate. This research was based on In the second step, named selection, methodologies used (1, 9). The former used trade indicators to identify within the upon each product TCI value. EU-MERCOSUR trade agreement products filteredThe dataTCI, wasbased divided on inthe two "revealed groups as well as the threatened ones. The latter specialization proposed by Balassa wasexported already by described.Argentina with opportunities (1965),comparative measures advantage" the level indexof complemen of trade- The methodology applied in this research used indicators such as Anderson the import (demand) of two countries and Norheim's (2) trade complementarity ortarity regions. between the export (supply) and The greater the similarity, higher is the probabilities of trade between them. values.index (TCI) Trade, combined tariff and with other trade data statistics, were fromnamely 2010 total to exports2010 period. and total Trade imports data

1 2 http://www.capri-model.org/dokuwiki/doku.php?id=capri:concept http://www.cgemod.org.uk/index.html

294 Revista de la Facultad de Ciencias Agrarias EU-MERCOSUR trade agreement: Finding winners products for Paraguay

TCI values greater (less) than 1 imply a with TCI equal or below one were not strong (weak) complementarity between considered in the study. The selection procedure continued and the import specialization of its with the computing of two indicators. partnerthe export (2, 9). specialization of a country "Indicator 1", measured of the EU market The TCI can be decomposed as the product of the Revealed Comparative share on Paraguay's export, see (a). Goods towith the exported EU (table value 1, pageabove 296). the average "Indicator had countryAdvantage and the Index Revealed (RCA) Comparative showing higher probability to increase their exports export specialization of the exporting import specialization of the importing 2" measured the capacity of Paraguay's Disadvantage Index (RCD), showing theexport average to respond were an to indication a EU's demand that the for each product industry (or sub-heading in producta specific had product, a high seeprobability (b). Values of rapidly below thiscountry. paper), As Vaillantthe trade (2003) complementarity explain "For increase its sales to the EU market.

EU TEVPy (a)  index of the exports of A (B) in the market Indicator1 TEVPy of B (A) equals the product of the export specialization index of A (B) (comparative where: advantage index) and the import EU TEVPy specialization index of B (A) (comparative disadvantage index). EU = European= Total export Union value from shareThe of exportthe industry, (import) (or sub-heading specialization in Py Paraguay to the EU index equals the ratio between the TEVPy (imports) and the share of the industry in = Paraguay worldthis paper), trade. in a country’s total exports = Total export valueTEV E fromU Paraguay Indicator 2 Py (b) TIV Py When the export (import) specialization where: index is greater than one, we say that the in that particular industry than the world TEVPy country is more export (import) oriented average, and therefore we conclude that TIVEU = Total imported value by the the country has a comparative advantage = EuropeanTotal export Union value of Paraguay (disadvantage) in that industry". The selection ended with the classi- country has a specialization for that categories. It was done by a process of "if… productWhen similar the index to the is world close average to one, (2). the then"fication using the TCI, selected indicator products 1 and into indicator eight In this paper for a product to be part of 2 average values as showed in table 1 the selected data it needed to have and TCI (page 296). greater than one, but with both RCA and Category I grouped products most RCD also greater than one. Those products according to the methodology. likely to increase their exports to the EU

Tomo 49 • N° 2 • 2017 295 V. Enciso Cano, M. Castillo Quero, T. De Haro Giménez

Table 1. Tabla 1. Matriz de caracterización. some products it accounted for more than Categorization matrix. small market for Paraguay's exports, in TCI* Indicator 1 Indicator 2 Categoría >1 > average <= average I* few90% items, of the basically total exported primarily value agriculture (TEV). >1 > average > average II Paraguay's exports were concentrated in a >1 <= average <= average III >1 <= average > average IV In the period of study, four chapters, products or their first manufactures. <=1 > average <= average V accounted for 78% of TEV, and within <=1 > average > average VI each of them few products added up for <=1 <= average <= average VII <=1 <= average > average VIII** These chapters and their weight in the TEVa large were portion as follows: of the chapter exported 27-mineral value. Source: Adapted from CEI (2003). fuels, mineral oils (mostly electric power) Fuente: Adaptado de CEI (2003). represented 30%, chapter 12-oil seed and oleaginous fruits (mostly soybean) 27%, They met the following conditions: chapter 2-meat and edible meat offal 11% TCI greater than one, EU's market share (mostly beef) and chapter 10-cereals of EU on the product above average, and (mostly wheat and corn) weighted 10%.

the average. Categories I to IV included products somehow caused a distortion goodsParaguay with weight TCI greater in EU's than imports one, meaning below Adding electric power among the exports

matched EU's demand. The following step in the traditional export structure of wasthat performedParaguay's onlyexports for forthese those products. products Paraguay. When it was not considered as Finally each product within categories thean export main chapters product, andthe structuretheir weights was morewere one to four was assigned to one of 38%in line for with oil theseed traditional and oleaginous profile. fruits, Then, two possible groups. This process was 16% for meat and edible meat offal and named prioritization. 14% for cereals.

once during the study period, to the EU - marketThe were goods called already high exported,priority products. at least A total of 818 out of 1,762 exported It was assumed that they would more 30%products of the met TEV theduring two the filtering study period. require likely increase their sales to the EU due to ments.The reduction These filtered in the number products of products totalized and their value led to some changes. First

"normaltheir "export priority". experience". The rest of the goods were classified as TEV,the market although share the ofnumber the EU of in sub-headings Paraguayan Results y discussion increasedexports was slightly further reaching reduced 33%. to 5.8% A second of the

manufactures'result of the filteringshare. wasSeveral a changeproducts in perDuring year at the a 6-digit period level of study, for a Paraguay total of includedthe export in structurethe main chapters with the cited increase above of 7,180exported million in USD. average Out of 1,762these, 511 products items were not subject of any border restrictions.

the EU. Although in general the EU was a valued 1,255 million were exported to

296 Revista de la Facultad de Ciencias Agrarias EU-MERCOSUR trade agreement: Finding winners products for Paraguay

Table 2. Filtered sub-headings by categories. Tabla 2.

Number of sub-headings Total exported Total exported Sub-partidas filtradas por categorías. Total imported Categories value by value by Exported by Exported by value by EU* Paraguay Paraguay to EU Paraguay* Paraguay to EU* Category I 9 9 13,691 7,157 3,898,572 Category II 4 4 73,048 38,607 2,271,525 Category III 39 11 105,671 1,281 60,299,404 Category IV 9 5 437,308 16,831 13,354,153 Category V 97 97 22,035 7,469 270,697,155 Category VI 1 1 68,643 16,831 2,246,975 Category VII 643 138 158,829 1,885 1,330,981,717 Category VIII 16 6 1,244,666 35,621 18,218,590 Total 818 271 2,123,891 125,682 1,701,968,092

Fuente: Elaborado por el autor con datos de WITS. / * Miles de dólares. Source: Prepared by the authors with data from WITS (Worl Integrated Trade Solution). / * Thousands of dollars.

They moved from primary agriculture product to manufactures, namely chapters theAs aweight result, of they those were chapters excluded in the from TEV. the 39, 41 as mentioned above plus chapter study, resulting in a significant reduction in 62 (articles of apparel and clothing accessories not knitted or crocheted). An goodsSpecifically, in chapters chapter 12 and 27 10 was were totally not includedexcluded either. from the As lista result of products. their relative Most weights decreased drastically. exceptionOut of thewas 818 chapter products, 2, which 106 addedhad a TCI 11 The main chapters and their weights in greaterpercentage than points one. to its export share. However, only 61 of them met the 2 (44 %), chapter 39 (10 %) (plastics and condition of having both the revealed articlesthe list ofthereof) filtered, chapterproducts 41 were (9%) chapter (raw comparative advantage and the revealed hides and skins (other than fur skins) and comparative disadvantage above one. leather) and chapter 62 (4%) (articles They were named selected products of apparel and clothing accessories not knitted or crocheted). categories. They accounted for 30% of the Despite the indicated changes, high and were distributed in the first four

exportThe valueremaining of the 45 filtered sub-headings products, were and fourconcentration chapters accounted of exports for 78% in a of smallTEV; distributed51% of export in valuecategories to the V EU. to VIII. Their number of products continued. Previously, complementarity with European demand added up to 67% of the TEV. was less than one. Therefore, they were followingEven though filtering it therepresented main four an chapters eleven not taking into further consideration. percentage point reduction it could still be considered high. Another important products within the categories was subject change was the level of value added in the to theThe values exact of location the other of two each indicators. one of the most important chapters.

Tomo 49 • N° 2 • 2017 297 V. Enciso Cano, M. Castillo Quero, T. De Haro Giménez

Although only 20% (11 products) were productDuring at 6 the digit period level, representing of study Paraguay 29% of exported to the EU 511 (out of the 1,762) classifiedThe high as agrifoods,participation they of had beef, a quote 51% of The UE average market share on the58% TEV in the of exportthe 61 value.products, was the main the total sub-heading exported to the world. was 17%, being the second market behind from the list, on the one hand agrifoods theParaguay's MERCOSUR. export showed by indicator 1 reason behind. When beef was excluded- The regional market participated with cantly, to 16%, and on the other hand, 44% of TEV. A total of 261 products had industrialreduced their manufactures relative importance boosted signifi their an indicator above the average, amounted participation and became the group with the EU. The main manufactures were chapter to just over half of the exported value to 39the withlargest 20%, export chapter share. 41 with 20%, and concentrated on a small number of products.Paraguay's export to the EU was 63) with 18%. textiles and textile articles (chapters 50 to categories showed the following: primaryThe firstagriculture ten goods products amounted mainly 95% (i)A more In category detailed I, look the tomain the firstproducts four soybeanof the exported and its manufactures, value. All of them as well were as were non-coniferous plywood, saddlery & bovine meat and its manufactures. harness for any animal, frozen orange juice Between 2010 and 2012, the EU and sugar cane molasses. They accounted imported 5.050 products for a value of 5.666.000 millions of dollars. Agrifoods had one third of that value. for 87 % of category exported value (CEV). amount, for 1,762 products. A total of EU at least once during the period of the Paraguay had a 0.0012 share on that study,All products and their had weight been exportedon the category to the above the average representing 97% of 182 products exported by Paraguay were (ii) In category II, four products In other words, a very small amount tanned/crustexported value hides was 52%.and skins of bovine, Paraguay's exported value to the EU. tobacco, not stemmed/stripped, grape- average, though it represented 75% of the fruit juice and silk yarn made the category. numberof Paraguay of products. export value was below the Hide and skins accounted for 84% of the Combining the TCI, indicator 1 and as an aggregated for a 14%. be assigned to one of the eight possible categoryAs in exportedcategory value,one, all while products agrifoods had indicator 2 allowed the 818 filtered to The following analysis focused on the once and weighted 53% in the CEV. categories using the categorization matrix. already(iii) Category been exported III had the to thelargest EU number at least structure showed the high importance of61 agrifood selected products products, ( Chapters At first glance 1 to 24 their of categories. the Harmonized System) of The sub-heading most important among thegoods, first always four

in the export with 30% of CEV, plastics with 16%, of Paraguay. magneticconsidering media export for value, data werestorage textiles, with 11%, and copper wires with 10%.

298 Revista de la Facultad de Ciencias Agrarias EU-MERCOSUR trade agreement: Finding winners products for Paraguay

The agrifoods had a low share relative to the previous categories, with a 6% of CEV. Just 29Paraguay's products export were is re-directed shown by theto factthe EU,that the if theEuropean total exported market valueshare ofwould the over 1% of the CEV was exported to the EU. increase to 86% of selected products it was(iv) Categorythe only IV category had the greatestin which export the value in the first four categories. Besides, Table 3 (page 300), shows the 29 products exported value (the 61 ones products). valueagrifoods accounted has a significant for 73% ofweight, the CEV as theyand reached 79% of the CEV. Beef exported with their code number exported values. four categories were put together. Conclusions and recommendations for Other half of theimportant exported products value when were the The research showed that in the study husked (brown) rice (4%), uppers and period, 2010-2012, the EU, in general, was partscarboys, of bottles,footwear flasks thereof, and similar other (10%), than stiffeners (4%) and other articles of not a major market for Paraguay's export. increaseThe low market once sharethe ofRegional the EU on Association Paraguay's waddingPrioritization of man-made of products fibers (3%). Agreementexports meant (RAA) a largebetween scope the for EU export and A total of 29 sub-headings out of the 61 showed that for some products the EU was at least once between 2010 and 2012. notMERCOSUR just an importantis in operation. market, A second but in finding many selectedThe ones29 goods, had been called exported high topriority the EU cases the only one. Despite this fact, EU's low participation 540.2 million USD or 86% of the four remained in general. This research applied products, had a total exported value of categories exported value put together. witha methodology the potential that identifiedto increase 61 productsor start accountedHigh concentration for 88% of of the exports 29 products in a exported by Paraguay during 2010-2012, few products deepened. Six products In other words, the already low EU's reproducedexports to thethe European traditional Union pattern once theof markettotal exported share value.not only continued, but it RAA is signed. At first glance the products was reduced to just 12% (63.9 million USD) from the 17% prior to the appli- thatexports is, high from concentration MERCOSUR countriesin agrifood in cation of the methodology. products.general and However, those of Paraguaythis importance in particular, was value to the EU, tanned or crust hides and This was beef or bovine meat. skinsTwo of productsbovine (51%) reached and 77% boneless of exports meat dueOnce to the bovine high value meat of was a specific taken outproduct. from of bovine animals, fresh or chilled (26%). Agrifoods accounted for 39% of the up, a hidden structure. the Mostlist a ofdifferent the products export structureof this hidden came not considered agrifoods participations structure were non agriculture manufac- wereexported reduced value. to However,only 14%. when beef was tures gathered under plastics and articles The potential of the EU market for

thereof, raw hides and skins, textiles and textile articles and glass and glassware.

Tomo 49 • N° 2 • 2017 299 V. Enciso Cano, M. Castillo Quero, T. De Haro Giménez

Table 3. High priority products. Tabla 3. Total exported Total exported Total Categories/ Product description Productos de prioridad superior.value by value by Paraguay imported code Paraguay* to EU* value by EU* Category I 13,691 7,157 3,898,572 Articles of gut (other than silk-worm gut), of goldbeater's 420600 33 33 38,282 skin, of bladders or of tendons. 410692 33 33 21,064 460219 Basketwork, wickerwork and other articles. 797 791 368,333 Tanned or crust hides and skins, not elsewhere specified. 540412 128 126 31,295 200911 Orange juice, frozen, unfermented. 2,224 2,113 753,935 Synthetic monofilament, of polypropylene. 420100 Saddlery and harness for any animal of any material. 2,388 1,910 539,559 170310 Cane molasses. 1,148 734 273,886 121299 Stevia rebaudiana ("Ka'a He'e"). 795 294 226,107

441232 6,143 1,123 1,646,110 at least one outer ply of non-coniferous wood Plywood, veneered panels and similar laminated wood with Category II 73,048 38,607 2,271,525 200929 2,596 2,411 120,151 Silk yarn (other than yarn spun from silk waste) not put up 500400 1,119 927 144,236 Grapefruitfor retail sale. juice (excl. of 2009.21). 410411 Tanned or crust hides and skins of bovine. 61,432 32,560 1,158,198 240110 Tobacco, not stemmed or stripped. 7,901 2,708 848,940 Category III 53,393 1,281 26,162,973

210120 2,174 131 312,136

390760 Extracts, essences and concentrates, of tea or maté, and 9,982 723 4,096,101 preparations with a basis of these extracts. 392350 Stoppers, lids, caps and other closures. 5,747 1 3,334,883 Poly(ethylene terephthalate). Trunks, suit-cases, vanity-cases, with outer surface of 420211 899 1 362,719 leather, of composition leather. Other articles of a kind normally carried in the pocket or in 420239 125 0 108,291 the handbag. 420500 Other articles of leather or of composition leather. 3,854 348 809,853 Other wood sawn or chipped lengthwise, sliced or peeled, 440729 3,512 74 540,565 whether or not planed, sanded or end-jointed, > 6 mm. 620322 73 1 64,132 Trousers, bib and brace overalls, breeches and shorts 620342 17,139 0 11,325,921 ofMen's cotton. or boys' ensembles (excluded knitted). Bed linen, table linen, toilet linen and kitchen linen of 630221 3,472 2 1,364,007 cotton. 701090 6,416 0 3,844,365 Category IV 400,060 16,831 10,862,013 Other carboys, bottles, flasks, jars, pots. 20130 Meat of bovine animals, fresh or chilled. 318,034 16,376 5,885,105 100620 Husked (brown) rice. 19,580 448 820,528 560122 13,853 6 340,570 392330 45,820 2 3,559,166 Wadding; other articles of wadding of man-made fibres. 690410 Ceramic building bricks. 2,773 0 256,644 Carboys, bottles, flasks and similar articles. Total 540,191 63,875 43,195,083

Fuente: Elaborado por el autor con datos de WITS. / * Miles de dólares. Source: Prepared by the authors with data from WITS (Worl Integrated Trade Solution). / * Thousands of dollars.

300 Revista de la Facultad de Ciencias Agrarias EU-MERCOSUR trade agreement: Finding winners products for Paraguay

will be hampered by two factors. One it to be more precise the study of non-tradi- This finding deserves further study, or raises considerably transportation cost. is the landlocked status of Paraguay that 29tional products exports. out of the 61 that were the lowest level of economic development The research also identified relativeSecondly, to Paraguay the rest isof thethe countryMERCOSUR. with and 2012. They had a similar structure The combination of both situations will andalready dependence exported on to fewthe EUproducts between as in2010 the selected list of products. or at least a great deal of the advantages The hidden importance of manufac- thatdelay will the capacitycome up of with Paraguay the agreement.to take any tures kept among the 29 goods. This is an indication that the country has the their partners from the MERCOSUR and potential to lessen its dependence on the theTherefore, EU to obtain Paraguay a Special must and negotiate Differential with Treatment status, as provided in The However further studies are needed, Uruguay Round agreements. exports of primary goods or raw material. paper were based only on tariff measures. greater facilities for market access to the takingFinally, into accountthe presence that the of findings complemen of this- EU Thisin relations treatment to should the other give toMERCOSUR Paraguay countries. There are precedents for such encouraging sign for the economy of the former,tarity between but it does Paraguay not imply and that the trade EU is will an MERCOSUR-Egypt, and MERCOSUR-India developed or increase between the parts. commercialpreferential agreements.treatment for Paraguay as in

Collecting the benefits or transforming the identified opportunities into real actions References

intrarregional y en el comercio de los países miembros con los países de Europa. ALADI. 1. ALADI. 2002.Asociación Probable Latinoamericana impacto que tendrían de Integración. los acuerdos ALADI/Secretaria con la Unión Europea General/Estudio en el comercio 149. Consultado el 30-agosto-2002. 2. Anderson, K.; Norheim, H. 1993. From imperial to regional trade preferences: its effect on

in http://www.springerlink.com/content/y11n8078l02h4354/about/ Consultado el Europe's9-Setiembre-2015. intra and extra-regional trade. Weltwirtschaftliches Archiv 129 (1). Available

3.4. Balaguer,Balassa, B. J.; 1965.Martinez-Zarzoso, Trade liberalization I. 2000. Análisis and revealed de los flujoscomparative comerciales advantages. Unión Europea-MERCOSUR. Manchester School Revistaof Economics Boletín and Económico Social Studies. de ICE. 33(2):N° 788, 99-123. Noviembre 2000. Madrid, 119-132.

losers in the FTAA and the EU-MERCOSUR agreement. Available in http://www.fcs. 5. Bittecourt,edu.uy/archivos/0206%20english.pdf. G.; Domingo, R.; Reig, N. 2006. FDI flows Consultado into MERCOSUR el 9-Setiembre-2015. countries: winners and 6. Boyer, I; Schuschny, A. 2010. Quantitative assessment of a free trade agreement between

MERCOSURin: and the European Union. Comisión Económica para América Latina (CEPAL). Serie Estudios estadísticos y prospectivos N° 69. Santiago de Chile, Chile. Available Consultadohttp://www.eclac.org/cgi-bin/getProd.asp?xml=/publicaciones/xml/1/41551/ el 9-Setiembre-2015. P41551.xml&xsl=/publicaciones/ficha-i.xsl&base=/publicaciones/top_publicaciones-i. xsl#

Tomo 49 • N° 2 • 2017 301 V. Enciso Cano, M. Castillo Quero, T. De Haro Giménez

7. Burrel, A.; Burrel, A.; Ferrari, E.; Gonzáles, M. A.; Himics, M.; Michalek, M.; Shrestha, S.; Van

Doorlaer,of the European B. 2011. PotentialUnion. Available EU-MERCOSUR in http://ipts.jrc.ec.europa.eu/publications/pub. Free Trade Agreement: Impact Assessment. Volumecfm?id=4819 1: Main Consultado Results. el Joint 9-Setiembre-2015. Research Centre-EU. Luxembourg-Publications Office

8. Castilho, M. 2001. The Access of mercosur exports Consultado to the single el market 9-Julio-2016. (December 2001). IPEA 9. CEI (2003Working a). Oportunidades Paper No. 851. y amenazas Available para at SSRN: la Argentina http://ssrn.com/abstract=297227 de un acuerdo MERCOSUR- or http://dx.doi.org/10.2139/ssrn.297227Unión Europea: Un estudio de impacto sectorial. Revista del Centro de Economía Internacional. Secretaria de Comercio y Relaciones Económicas Internacionales.

del CEI. Nro. 3. Febrero 2003. Buenos Aires. 106 p. 10. Francois,Ministerio J.; Hall, K. de H. Relaciones 2003. Global Exteriores, simulation Comercio analysis Internacional of industriy-level y Culto. trade Serie policy. Estudios The Available in http://wits.worldbank.org/data/public/GSIMMethodology.pdf 22 pp. Consultado Worldel 5-Diciembre-2015. Bank Technical Paper, Versión 3.0. Abril 2003 mimeo, Washington D.C.

Available 11. Jacobo, in A. 2008. Una estimación de una ecuación gravitacional para los flujos bilaterales de manufacturasConsultado el 5-Diciembre-2015.MERCOSUR-Unión Europea. Econ. Apl., Ribeirão Preto, V. 14, n. 1. 12. Kirkpatrick, http://www.scielo.br/scielo.php?pid=S1413-80502010000100005&script=sci_arttextC. 2008. Sustainability impact assessment of the association agreements under negotiation between de European Union and The Mercosur. Available in http://

Consultado el 9-Setiembre-2015. www.sia-trade.org/mercosur/phase2/OVERVIEW_INCEPTION_revised_June_08.pdf. Febrero 2011. Madrid, 119-132. 13.14. Maesso,Milner, C.; M. Morrisey,2011. La integraciónO.; McKay, A.económica. 2004. Some Revista simple Boletín analytics Económico of the trade de ICE. y welfareN° 858, Enero-effects of economic partnership agreements. Journal of African Economies.14(3): 327-358.

15.16. Piermartini,Solares, A. 2010. R.; Teh, Integración. R. 2005. Demystifying Teoría y procesos. modelling Bolivia methods y la integración, for trade policy. Edición WTO electrónica Discussión Paper N° 10. Organización Mundialwww.eumed.net/libros/2010e/814/. de Comercio. Ginebra, Suiza. 59 Consultado p. el 9-Setiembre-2015. 17. Trejos, gratuita.A. 2009. Texto Instrumentos completo en para evaluación del impacto de acuerdos comerciales internacionales: aplicación para países pequeños en América Latina. Serie Estudios

Available in y Perspectivas 110. Conferencia Económica de las Naciones Unidas para América Latina-Sede México. Consultado el 9-Setiembre-2015http://www.eclac.org/cgi-bin/getProd.asp?xml=/ 18. UNCTAD.publicaciones/xml/9/37329/P37329.xml&xsl=/mexico/tpl/p9f.xsl&base=/mexico/ 2012. A practical guide to trade policy analysis. United Nations Conference on Trade tpl/top-bottom.xsl.and Development. Organización Mundial de Comercio. 232 p. 19. Vaillant, M.; Ons, A. 2003. Winners and losers in a free trade area between the United States and Mercosur. Working paper 14/03, Departamento de Economía, Universidad de la República, Montevideo. Available at http://decon.edu.uy/publica/2003/Doc1403.pdf. Consultado el 28-Noviembre-2016 20. Valdes, R.; Diaz Osorio, J. 2015. The Brazilian beef meat sector into a domestic and international

Ciencias Agrarias. Universidad Nacional de Cuyo. Mendoza. Argentina. 47(1): 233-239. context: a Supply Chain Management (SCM) approach. Revista de la Facultad de 22. Weissleder, L.; Adenäuer, M.; Heckelei, T. 2008. Impact assessment of trade liberalization 21. Viner, J. 1950. The Custom Union Issue, Carnegie Endowment for International Peace, Nueva York.th

betweenJanuary 29 EUth-February and MERCOSUR 1st, 2008. countries. Available Paper in http://purl.umn.edu/6667 prepared for presentation. Consultado at the 107 el EAAE09-Setiembre-2015. Seminar Modeling of Agricultural and Rural Development Policies. Sevilla, Spain,

302 Revista de la Facultad de Ciencias Agrarias