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Chile - Almost a member of the Mercosur Club

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Introduction

Shawn Abrahim Internal Assessment- Economics Coursework Chile - Almost a member of the Mercosur Club GDP is a popular measure that gauges the total amount of goods and services produced in a country annually. Chile is enormously dependant on trade, which makes up approximately 87% of its GDP. The economic benefits of joining Mercosur would be outstanding. Mercosur is a customs market comprised of Brazil, Uruguay, Paraguay and Argentina. It is the third largest trading bloc in the world with a market of $1.1trillion (U.S) and 220 million consumers. Members of a customs market have no trade barriers, such as tariffs, amongst themselves. ...read more.

Middle

Joining Mercosur will give Chile the negotiating power to trade with other large trading bloc's such as the EU. This will help increase Chile's volume of trade and lower trade barriers they face across the world. With increased trade, all parties involved will benefit. Chile will further specialize in the products that they have a competitive advantage (Lowest opportunity cost associated with production) in and they will be able to operate more efficiently. They will trade goods that they can efficiently produce for goods that they cannot produce resourcefully. There are people who feel more trade is negative. ...read more.

Conclusion

This makes Chile an attractive trading partner due to the ease with which foreign products can enter Chile. While common trade policies for nonmembers usually mean lower tariffs for most countries, Chile would have to increase its tariffs to keep inline with the rest of Mercosur. This would make Chile less popular as a trading partner for non-Mercosur members. (See figure A) Chile must decide if the benefits of increased influence in the international market, combined with increased trade with Mercosur members, will outweigh the problems created if domestic tariffs against non-members are raised. 443 words Source: Rachel Holmes, (November 1 2000) Almost a member of the Mercosur club http://www.ecountries.com/the_americas/chile/news/1403231 ...read more.

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