Preferential trading arrangements between the European Union and South America: The political economy of free trade zones in practice

The results of the process of trade liberalisation between SA countries and the EU will have differential consequences for the foreign trade of each of the countries involved. Such consequences can be grouped in two sets: (i) trade opportunities - this refers to the potential expansion of SA (EU) extra-regional exports as a result of the improvement in the access conditions to the EU (SA) market. (ii) trade perils - this refers to the defensive action by import substitution sectors on a regional scale, faced with the potential displacement of their regional exports. The objective of this study is the construction of two lists of products, one expansive (opportunities) and one defensive (perils). Thus, it would be possible to design a guide for trade negotiations between the EU and the countries of SA. This guide would establish offensive and defensive priorities (opportunities and perils) at the level of products, for each of the participants. The general focus here is of a mercantilist type; it implicity assumes that exports are good and imports are bad. In fact, it is known that, in terms of an evaluation of the effects on economic welfare, exactly the opposite is true. However, in trade negotiations the mercantilist focus is very often equally or more decisive than considerations of added welfare. Trade negotations are in their very essence mercantilist.