Europe and Latin America: Analysis of the Effect of Trade Agreements on Exports

Abstract

One of the leading commercial drivers applied in developing countries, especially in economies with conservative policies, is free trade agreements or tariff preferences with strategic economic zones worldwide. The countries of Latin America and the Caribbean are no exception. The United States is the region's leading trading partner; however, several countries have signed trade agreements with the European area in recent years. In this paper, we ask ourselves to what extent these agreements are beneficial. In addition, we evaluate the impact on exports with other world regions. Mainly, we analyze the effect of commercial firms in the European zone on the level of exports of the other partners, especially with the United States. The results consistently suggest that signing trade agreements with the European zone generates an export displacement effect. In other words, although the gross level of exports to the European zone increases, the level of exports to other regions of the world, especially to the United States, grows faster than other countries that do not even have agreements with the Europeans. Generally, exports do not have a statistically significant effect on signing trade agreements with the European zone.