Tuesday, May 20, 2008
[IWS] CRS: MERCOSUR: EVOLUTION & IMPLICATIONS for U.S. TRADE POLICY [26 March 2008]
IWS Documented News Service
_______________________________
Institute for Workplace Studies----------------- Professor Samuel B. Bacharach
School of Industrial & Labor Relations-------- Director, Institute for Workplace Studies
Cornell University
16 East 34th Street, 4th floor---------------------- Stuart Basefsky
New York, NY 10016 -------------------------------Director, IWS News Bureau
________________________________________________________________________
Congressional Research Service (CRS)
Order Code RL33620
Mercosur: Evolution and Implications for U.S. Trade Policy
Updated March 26, 2008
J. F. Hornbeck, Specialist in International Trade and Finance, Foreign Affairs, Defense, and Trade Division
http://assets.opencrs.com/rpts/RL33620_20080326.pdf
[full-text, 24 pages]
Summary
Mercosur is the Common Market of the South established by Brazil, Argentina,
Uruguay, and Paraguay in 1991 to promote economic integration and political
cooperation among the four countries. Since then, Mercosur has struggled to achieve
deep economic integration, but has maintained a cooperative economic and political
framework, which has also become an influential voice in determining the fate of the
hemisphere's regional integration initiatives. In particular, the U.S. vision for
hemispheric integration, the Free Trade Area of the Americas (FTAA), has stalled
largely because of opposition from within Mercosur, which in turn has focused on
its own, albeit limited, expansion.
The Mercosur pact calls for an incremental path to a full integration, but after
15 years, only a limited customs union has been achieved. From the outset, Mercosur
struggled to reconcile a basic inconsistency in a pact of partial economic union: how
to achieve economic integration, while also ensuring that the benefits would be
balanced among members and that each country would retain some control over its
trade, production, and consumption structure. This delicate balance faced
overcoming serious structural and policy asymmetries that became clear when Brazil
and Argentina experienced financial crises and deep recessions. These economic
setbacks disrupted trade flows among members, causing friction, the adoption of
protectionist measures, and a retreat from the commitment to deeper economic
integration.
For now, Mercosur has turned to expanding rather than deepening the
agreement. Many South American countries have been added as "associate
members" and Mercosur has reached out for other South-South arrangements in
Africa and Asia all limited agreements and unlikely paths to continental economic
integration. Internal conflicts have highlighted Mercosur's institutional weaknesses
and slowed the integration process. On July 4, 2006, Venezuela signed an accession
agreement to become its first new full member, making Mercosur the undisputed
economic counterweight to United States in the region, but raising questions about
how Venezuela's membership may shift regional political and trade dynamics.
It appears that Mercosur has opted to emphasize its expansion both in the region
and with other developing countries over agreements with its largest developed
country trade partners, looking to the World Trade Organization (WTO) as the
preferred alternative for achieving many of its trade policy goals. Nonetheless, U.S.-
Mercosur commercial and economic ties are expanding and the United States is
pursuing deeper bilateral trade relations with Uruguay that could provide new ideas
for a broader integration commitment. The alternative may be for Mercosur and the
United States to expand their mutually exclusive bilateral agreements, increasing the
potential for overlapping trading systems, which few, if any, view as either
economically or administratively optimal.
Contents
U.S.-Mercosur Trade Prospects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Formation and Institutional Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Intra-Mercosur Trade and Internal Dynamics . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Intra-Mercosur Trade Trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Asymmetries: Country Perspectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Argentina . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Paraguay and Uruguay . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
The "Pulp Mill" Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Mercosur External Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Mercosur Outreach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Venezuelan Accession . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Mercosur and the Doha Round . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
The Mercosur-Israel Free Trade Agreement . . . . . . . . . . . . . . . . . . . . . . . . 17
China-Mercosur Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Implications for U.S. Trade Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Appendix A. U.S. Merchandise Trade with Mercosur . . . . . . . . . . . . . . . . . . . . 19
Appendix B. Intra- and Extra-Mercosur Merchandise Trade by Country . . . . . . 20
List of Figures
Figure 1. U.S.-"Mercosur-4" Balance of Merchandise Trade . . . . . . . . . . . . . . . . 2
Figure 2. Intra-Mercosur Exports as Percent of Total Mercosur Exports, 1990-2007 . . . . . . . . . . . 7
______________________________
This information is provided to subscribers, friends, faculty, students and alumni of the School of Industrial & Labor Relations (ILR). It is a service of the Institute for Workplace Studies (IWS) in New York City. Stuart Basefsky is responsible for the selection of the contents which is intended to keep researchers, companies, workers, and governments aware of the latest information related to ILR disciplines as it becomes available for the purposes of research, understanding and debate. The content does not reflect the opinions or positions of Cornell University, the School of Industrial & Labor Relations, or that of Mr. Basefsky and should not be construed as such. The service is unique in that it provides the original source documentation, via links, behind the news and research of the day. Use of the information provided is unrestricted. However, it is requested that users acknowledge that the information was found via the IWS Documented News Service.
Stuart Basefsky
Director, IWS News Bureau
Institute for Workplace Studies
Cornell/ILR School
16 E. 34th Street, 4th Floor
New York, NY 10016
Telephone: (607) 255-2703
Fax: (607) 255-9641
E-mail: smb6@cornell.edu
****************************************
_______________________________
Institute for Workplace Studies----------------- Professor Samuel B. Bacharach
School of Industrial & Labor Relations-------- Director, Institute for Workplace Studies
Cornell University
16 East 34th Street, 4th floor---------------------- Stuart Basefsky
New York, NY 10016 -------------------------------Director, IWS News Bureau
________________________________________________________________________
Congressional Research Service (CRS)
Order Code RL33620
Mercosur: Evolution and Implications for U.S. Trade Policy
Updated March 26, 2008
J. F. Hornbeck, Specialist in International Trade and Finance, Foreign Affairs, Defense, and Trade Division
http://assets.opencrs.com/rpts/RL33620_20080326.pdf
[full-text, 24 pages]
Summary
Mercosur is the Common Market of the South established by Brazil, Argentina,
Uruguay, and Paraguay in 1991 to promote economic integration and political
cooperation among the four countries. Since then, Mercosur has struggled to achieve
deep economic integration, but has maintained a cooperative economic and political
framework, which has also become an influential voice in determining the fate of the
hemisphere's regional integration initiatives. In particular, the U.S. vision for
hemispheric integration, the Free Trade Area of the Americas (FTAA), has stalled
largely because of opposition from within Mercosur, which in turn has focused on
its own, albeit limited, expansion.
The Mercosur pact calls for an incremental path to a full integration, but after
15 years, only a limited customs union has been achieved. From the outset, Mercosur
struggled to reconcile a basic inconsistency in a pact of partial economic union: how
to achieve economic integration, while also ensuring that the benefits would be
balanced among members and that each country would retain some control over its
trade, production, and consumption structure. This delicate balance faced
overcoming serious structural and policy asymmetries that became clear when Brazil
and Argentina experienced financial crises and deep recessions. These economic
setbacks disrupted trade flows among members, causing friction, the adoption of
protectionist measures, and a retreat from the commitment to deeper economic
integration.
For now, Mercosur has turned to expanding rather than deepening the
agreement. Many South American countries have been added as "associate
members" and Mercosur has reached out for other South-South arrangements in
Africa and Asia all limited agreements and unlikely paths to continental economic
integration. Internal conflicts have highlighted Mercosur's institutional weaknesses
and slowed the integration process. On July 4, 2006, Venezuela signed an accession
agreement to become its first new full member, making Mercosur the undisputed
economic counterweight to United States in the region, but raising questions about
how Venezuela's membership may shift regional political and trade dynamics.
It appears that Mercosur has opted to emphasize its expansion both in the region
and with other developing countries over agreements with its largest developed
country trade partners, looking to the World Trade Organization (WTO) as the
preferred alternative for achieving many of its trade policy goals. Nonetheless, U.S.-
Mercosur commercial and economic ties are expanding and the United States is
pursuing deeper bilateral trade relations with Uruguay that could provide new ideas
for a broader integration commitment. The alternative may be for Mercosur and the
United States to expand their mutually exclusive bilateral agreements, increasing the
potential for overlapping trading systems, which few, if any, view as either
economically or administratively optimal.
Contents
U.S.-Mercosur Trade Prospects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Formation and Institutional Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Intra-Mercosur Trade and Internal Dynamics . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Intra-Mercosur Trade Trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Asymmetries: Country Perspectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Argentina . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Paraguay and Uruguay . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
The "Pulp Mill" Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Mercosur External Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Mercosur Outreach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Venezuelan Accession . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Mercosur and the Doha Round . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
The Mercosur-Israel Free Trade Agreement . . . . . . . . . . . . . . . . . . . . . . . . 17
China-Mercosur Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Implications for U.S. Trade Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Appendix A. U.S. Merchandise Trade with Mercosur . . . . . . . . . . . . . . . . . . . . 19
Appendix B. Intra- and Extra-Mercosur Merchandise Trade by Country . . . . . . 20
List of Figures
Figure 1. U.S.-"Mercosur-4" Balance of Merchandise Trade . . . . . . . . . . . . . . . . 2
Figure 2. Intra-Mercosur Exports as Percent of Total Mercosur Exports, 1990-2007 . . . . . . . . . . . 7
______________________________
This information is provided to subscribers, friends, faculty, students and alumni of the School of Industrial & Labor Relations (ILR). It is a service of the Institute for Workplace Studies (IWS) in New York City. Stuart Basefsky is responsible for the selection of the contents which is intended to keep researchers, companies, workers, and governments aware of the latest information related to ILR disciplines as it becomes available for the purposes of research, understanding and debate. The content does not reflect the opinions or positions of Cornell University, the School of Industrial & Labor Relations, or that of Mr. Basefsky and should not be construed as such. The service is unique in that it provides the original source documentation, via links, behind the news and research of the day. Use of the information provided is unrestricted. However, it is requested that users acknowledge that the information was found via the IWS Documented News Service.
Stuart Basefsky
Director, IWS News Bureau
Institute for Workplace Studies
Cornell/ILR School
16 E. 34th Street, 4th Floor
New York, NY 10016
Telephone: (607) 255-2703
Fax: (607) 255-9641
E-mail: smb6@cornell.edu
****************************************
# posted by SBasefsky : 6:25 AM
