Economic liberalism and regional trade agreements: The cases of MERCOSUL and NAFTA

Comparing MERCOSUL and NAFTA, this project attempts to check the hypothesis that regional trade agreements, as a manifestation of the free trade theory, generates trade, stimulates growth and improves the democratic standards of countries engaging in those accords. A discussion concerning the free theory shows the benefits countries might achieve when liberalizing their trade policies. However, as it happens with any theory, convincing all sectors involved is always a very hard task and that is perhaps the reason of the existence of so many opponents to free trade and consequently regional trade agreements.; Looking at their behavior when negotiating among themselves, I demonstrate that countries possessing higher economic power end up making the rules and usually exercise that power in some sense or another. Nevertheless, smaller economies do not remain quiet. They try to defend themselves either with an association with a bigger economy or uniting themselves depending on the circumstances.; A quantitative analysis gives evidences that those agreements generated trade, indirectly stimulated growth through investments, and improved democratic standards, with NAFTA members apparently benefiting more than MERCOSUL ones. My conclusions show that the positive impacts of free trade are witnessed only in the long term and that the free trade theory should not be accountable for economic development alone. Free trade is supposed to generate income so countries themselves will work towards that so desired objective.