Mercosur deal sets cooperation trend

Date: 14/12/1995

WHEN they meet in Madrid this weekend, heads of state and government will be hard pressed to make a more enthusiastic statement about the link-up of two trade blocs than that already made by External Relations Commissioner Manuel Marín.

“The trend of the end of this century is regional cooperation,” he said this week, claiming the EU was “setting that trend” by laying the foundations for a customs union with the four-nation Mercosur bloc.

At the summit which begins tomorrow (15 December), EU leaders will meet their counterparts from Argentina, Brazil, Paraguay and Uruguay to sign a cooperation agreement designed to strengthen relations and prepare the ground for formal political ties and, eventually, a free trade area between the two blocs.

“With this pioneer agreement we are drawing up a new strategy for European Union relations with the rest of the world into the next century,” said Marín.

In Mercosur's case, the Union wants regular political dialogue “at the highest level” so that both blocs come to international gatherings with their positions aligned, and progressive moves towards reciprocal free trade in all sectors. Scientific and cultural cooperation is also included in the agreement. Joint summits every second year, with meetings of ministers and top officials regularly during the next five years, should create the blueprint for full political and trade cooperation, says the Commission.

Because the accord needs the approval of national parliaments in EU member states, which could delay its implementation for a year or two, EU foreign ministers have agreed that political dialogue may begin without legislative approval. A joint committee administering the accord and setting the trade liberalising calendar may also begin work immediately.

Not only will the agreement be the first such between two distinct customs unions, but its supporters say it will establish the Union as a centre of enlightened and progressive thinking. Marín says the accord acknowledges that “the international agenda for the next century will have to include the southern hemisphere”.

No longer will Europe, the United States and Japan be able to set political or commercial agendas for the rest of the world, insisted the Commissioner. Latin America, the Mediterranean region and Asia would have to be given more say in international fora such as the UN, the G7, the World Bank and the International Monetary Fund.

Mercosur should step up to take a leading role in that new world order.

Officially titled the Southern Cone Common Market, Mercosur was formed in March 1991 and allows free movement of goods and services in the four Latin American countries. It can negotiate as a unit with other countries and has institutions similar to those of the EU.

European officials hope the Union and its single market can serve as a model for further political and economic developments in Mercosur. As the Latin bloc's main trading partner, top development aid donor and primary investor, the EU is acquiring plenty of influence there.

Covering 12 million square kilometres and totalling 195 million people, Mercosur represents more than half of Latin America's land mass and nearly half its population. Its gross domestic product last year, worth 550 billion ecu, made it the world's fourth biggest economy after the EU, the US and Japan. Mercosur's total trade in 1994 was worth some 92 billion ecu, of which only about 8 billion ecu was traded between its member states.

Bolivia has just signed a pact with Mercosur establishing free trade between them by the year 2006, and Mercosur is also negotiating possible membership with Chile and Venezuela.