Merc_IB

Topics: International trade, South America, Mercosur Pages: 6 (2317 words) Published: October 27, 2014
10/24/2014

Mercosur: South America's Fractious Trade Bloc - Council on Foreign Relations

Mercosur: South America's
Fractious Trade Bloc
Authors: Joanna Klonsky, Associate Editor, Stephanie Hanson, and Brianna Lee Updated: July 31, 2012
This publication is now archived.

Introduction
What is Mercosur?
What are associate members?
Why was Paraguay suspended as a Mercosur member?
What are the implications of Venezuela joining as a full member? Does Mercosur have a political agenda?
How does Mercosur affect other regional groups?
How has Mercosur stimulated cooperation among its members?
What are the prospects for Mercosur's future?

Introduction
Mercosur, the "Common Market of the South," is an economic and political agreement among Argentina, Brazil, Paraguay (which is currently suspended), and Uruguay to promote the free movement of goods, services and people among member states. Mercosur's primary interest has been eliminating obstacles to regional trade, such as high tariffs and income inequalities. Yet experts say Mercosur has become somewhat paralyzed in recent years, with its members divided over whether the organization should remain focused on regional trade or whether it should add political affairs to its mandate. In July 2012, Venezuela was admitted to the trade bloc as its fifth full member with complete access to the common market and voting rights, a move that some analysts say will primarily benefit Argentina and Brazil and further politicize the organization. The creation of a regional customs union in 2008, the Union of South American Nations (UNASUR), also has raised questions about Mercosur's utility. Moreover, Paraguay's 2012 suspension from the bloc has added fresh concerns about the bloc's future.

What is Mercosur?
http://www.cfr.org/trade/mercosur-south-americas-fractious-trade-bloc/p12762

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10/24/2014

Mercosur: South America's Fractious Trade Bloc - Council on Foreign Relations

The Mercosur trade bloc's purpose, as stated in the 1991 Treaty of Asunción, is to allow for free trade between member states, with the ultimate goal of full South American economic integration. The trade bloc's "grand aspiration is to unify the Southern Cone and then all of South America in an economic bloc," says Katherine Hancy Wheeler, a research associate with the Council on Hemispheric Affairs. "It gives them more trading security." Brazil is the region's largest economy with a gross domestic product (GDP) of more than $2.2 trillion in 2012. The population of Mercosur's full membership totaled more than 260 million people in 2011; including Venezuela, it has a collective GDP of $2.9 trillion and is the world's fourth-largest trading bloc after the European Union (EU), North American Free Trade Agreement (NAFTA), and the Association of South East Asian Nations (ASEAN). Whether any reduction in poverty can be linked directly to Mercosur trade policies is unclear.

What are associate members?
Mercosur has five associate members--Chile, Bolivia, Colombia, Ecuador, and Peru--that do not enjoy full voting rights or complete access to the markets of Mercosur's full members. They receive tariff reductions, but are not required to impose the common external tariff that applies to full Mercosur members. Of these countries, Bolivia is being considered for full membership. But the decision is complicated by Mercosur's history with Bolivia, as well as the common external tariff. Bolivian President Evo Morales has criticized Mercosur, saying, "What I've discovered is that the CAN [Andean Community of Nations] as well as Mercosur are tools that only benefit businessmen and wealthy people, instead of the poor people" (People's Daily). Full membership for Bolivia may also prove problematic because Bolivia's tariffs are lower than those of Mercosur. "They'd have to increase those tariffs to join," which would have a significant impact on prices within Bolivia, says Financial Times' Latin America...
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