MERCOSURPresented By: Tarundeep SinghVinay Chawla

ORIGIN•Treaty signed on March 26th 1991 by

Brazil, Argentina, Paraguay and Uruguay

•Treaty of Asuncion Supplemented Brazil and Argentinas already established Treaty of Buenos Aires.

•Venezuela signed agreement June 17 2006 (pending)

HISTORY•1991: Treaty of Asunción goes into force

in 1991, effectively mandating the creation of a common southern market (MERCOSUR) by December 31, 1994.

•Original signatories are Brazil, Argentina, Paraguay, and Uruguay

•1994: Creation of Mercosur

HISTORY (CONTD…..)

•1995: Creation of customs union. MERCOSUR and the European Union sign an agreement of trade association and cooperation in various areas

•1999: Free trade agreement with two trading block EU and NAFTA

•2004: Preferential trade agreement with India

INTRODUCTION•Mercado Comun del Sur (Common Market

of the South)

•Custom Union: Brazil, Argentina, Paraguay, Uruguay, and Venezuela

•Biggest Trade Block in South America and 4th Worldwide

•Its purpose is to promote free trade and the fluid movement of goods, people, and currency

ASSOCIATES AND OBSERVERS

•Colombia•Bolivia•Chile•Ecuador•Peru•Venezuela•Mexico ( Observer)

Reason- Mexico is a member of NAFTA.

OBJECTIVES

•Free Transit amongst members

•Elimination of Custom Rights

•Common External Tariffs

•World Economic Power

MERCOSUR POPULATION

•Brazil makes up 80% of MERCOSUR population (191,241,714)

•Argentina (40,482,000) Venezuela (26,414,826) Paraguay (6,821,306) Uruguay (3,477,780)

•Over 268 billion population combined

REASONS FOR DIFFICULTY IN EXISTENCE ON INTEGRATION

•Economic Instability2002- Argentina’s economic issues, peru value reduction, affecting Brazil and Uruguay, price of commodities in Argentina fall.

•Political InstabilityPresident of Brazil trying to get global recognition to become the leader of developing countries created resentment to Argentina.

VENEZUELA ISSUE

•Brazil▫2 Year delayed acceptance ▫Itaipu treaty▫Brazil will benefit from Venezuela’s

resources

•Paraguay▫Acceptance yet to be ratified▫Pressure on Fernando Lugo▫Political stress in Paraguay

INDIA & MERCOSUR• A Framework Agreement had been signed between

India and MERCOSUR on 17th June 2003

• India – MERCOSUR PTA came into effect from 1st June, 2009

• Products covered in Indian offer list are meat and meat products, organic & inorganic chemicals

• Product covered in the offer list of MERCOSUR are food preparations, pharmaceuticals, essential oils

•  It was estimated that trade volume should reach 17 billion USD in 2012 and 30 billion USD by 2030

ADMINISTRATIVE/INSTITUTIONAL STRUCTURE OF MERCOSUR• Common Market Council (CMC):

The Council is the highest-level agency of MERCOSUR with authority to conduct its policy, and responsibility for compliance with the objects and time frames set forth in the Asuncion

• Common Market Group ( CMG): To cause compliance and to take resolutions required

for implementation of the decisions made by the Council. It can initiate practical measures for trade opening Coordination of macroeconomic policies Negotiation of agreements with non-member states and

international agencies Participating when need be in resolution of

controversies under MERCOSUR

ADMINISTRATIVE/INSTITUTIONAL STRUCTURE OF MERCOSUR(CONTD..)

• Commercial Commission of MERCOSUR (CCM):Assists the Common Market Group in the enforcement of trade policies

• Joint Parliamentary Commission (CPS):The Committee will have both an advisory and decision-making nature, with powers to submit proposals as well

• Social-Economic Consultative Forum (FCES):Brings together various associations and interest groups from member countries

MERCOSUR AFFECT ON OTHER REGIONAL GROUPS• Mercosur's charter does not allow its

member nations to have FTAs with non-member nations.

•Mercosur members are not permitted to be part of the Andean Community of Nations (CAN)

•Mercosur played a key role in the failure of the Free Trade Agreement of the Americas (FTAA).

Graph Showing sector wise Trade (in Billion Euros) with EU for the year 2012

Source: http://www10.iadb.org

ACHIEVEMENTS• Mercosur has helped its members to lock in

domestic reforms.

• Internationally, the regional association has given its members a degree of visibility that they would not have gained otherwise.

• Increased visibility is politically and strategically relevant in and of itself, but it also contributed to massive foreign investment in the 1990s, a decade of vast capital availability.

ACHIEVEMENTS CONTD..• Economically, Mercosur also attained initially

good results.

• Intra-regional trade tripled in the seven years following the signature of the Treaty of Asuncion.

• The increase resulted from trade creation rather than diversion, since extra-regional trade also augmented.

FALIURES• Representation is weak or non-existent: the Mercosur

parliamentary body represents national parliaments not citizens and it lacks effective competences.

• The Mercosur flag and its associated symbols are not widely used, remaining limited to the diplomatic arena.

• Unlike the EU, which put the so-called four freedoms at the heart of economic integration, ‘MERCOSUR has not gone beyond goods’ trade liberalisation.

FALIURES CONTD..• The chosen integration technology has also proved

to be either insufficient or inefficient. Since all decision- making, dispute-settlement and implementation capacities are in the hands of the member countries, Mercosur operates through diplomatic rather than juridical procedures.

• As regards the international dimension, Mercosur has failed to enlarge its membership.

• Mercosur’s institutional deficits are probably the most visible but not always the best understood.

FUTURE IMPLICATIONS• To raise the maximum common external tariff on

imports to 35 percent

• Washington views the bloc as an obstacle to the expansion of their trade in Latin America

• In the long run, the end of Mercosur will be a good thing if it drives its members to open trade with the rest of the world.

• But in the short run, with so many industries heavily invested in the rules of the Mercosur game, a breakup is certain to be disruptive