Paraguay's export to MERCOSUR: Sub heading threatened by de UE-MERCOSUR trade agreement

The impact of the EU-MERCOSUR Regional Association Agreement, which has been under negotiation since 2000, has been widely studied with an emphasis on Brazil and Argentina, before Paraguay and Uruguay. Models that provide aggregate results and not products as negotiated have been used. Taking these into consideration the research focused on Paraguay with the objective of identifying products exported by this country to MERCOSUR, which could be substituted by similar ones from the EU, once the Agreement is implemented. The identification was made at the level of sub headings of the Harmonized Commodity Description and Coding Systems (HS) usingtrade indicators.The data used was the trade average from 2010-2012, the most updated at the time the study started.Trade data were from the World Bank database known as WITS (World Integrated Trade Solutions), and MERCOSUR´s tariff data from the Common External Tariff website. The most threatened sub headings of being replaced or displaced from MERCOSUR had a low weight in Paraguayan exports. However, for several products, MERCOSUR was the only or the most important market. The disaggregation by categories facilitated identifying the threatened products and quantifying the importance of the regional market for them. Most products with substitution threats were manufactures. These results lead to the conclusion that the Agreement will negatively affect mainly the manufacturing industry in Paraguay.