Economic Relations of the European Union and Mercosur. Jean Monnet/Robert Schuman Paper Series, Vol. 1 No. 9, October 2002

Arenas, Mariela. (2002) Economic Relations of the European Union and Mercosur. Jean Monnet/Robert Schuman Paper Series, Vol. 1 No. 9, October 2002. [Working Paper]

Preview

PDF Download (275Kb) | Preview

Abstract

(From the introduction). The “Southern Cone Common Market” was created in 1991 not with the aim, as its name would imply, of achieving just an economic integration of its member states, but rather of creating a meaningful entity encompassing the political, productive and social aspects of its member states. By joining forces, its four member states (Argentina, Brazil, Paraguay and Uruguay) represent the single largest market in Latin America, with 210 million inhabitants and a total GDP of US$1.1 trillion, representing the fourth largest economic entity in the world. (1) Since the 1994 Protocol of Ouro Preto, Mercosur has followed the spirit of the European Union in its ambitious objective of creating a large supranational entity rather than remaining at the intergovernmental integration level sought by other regional blocs, such as NAFTA. The EU has been working to strengthen its ties with Mercosur since 1992, with the signature of the Technical Cooperation Agreement. In the following years, the relationship between the two blocs has evolved considerably. In 1995, both parties signed an Inter-Regional Framework Cooperation Agreement, which initiated the process towards a definitive Association Agreement. A series of negotiation rounds was carried out starting in the year 2000 with the objective of hammering out the details for a free trade agreement. Beyond the historical and political linkages between the Mercosur member states and Europe, the association with the European Union is important for several reasons. First, from a purely economic point of view, both regions are already intimately tied as the EU is Mercosur’s largest trading partner and source of foreign direct investment. Second, as previously mentioned, Mercosur’s framework draws significantly from the EU model. In this sense, the experiences from the EU can represent a valuable resource at the time of designing Mercosur’s institutions and implementing any necessary policies. Third, Mercosur’s member countries, and in particular Brazil, are interested in raising their profile in the international geopolitical arena. In this sense, an association with the EU would give Mercosur member states a significant degree of leverage and prestige. Finally, and not unrelated to the previous point, any progress in its association discussions with the European Union could strengthen Mercosur’s position in the context of the future FTAA negotiations. From the European point of view, any closer relationship with Mercosur would be valuable because, first, Mercosur comprises two of the three largest markets in Latin America, with product offerings that are largely complementary to those of the EU. Secondly, Mercosur is the only other integration agreement that shares the EU’s values and ideals. (2) And third, it is an objective of the EU to avoid any deviation of commerce that might arise from the implementation of the FTAA. This paper summarizes the three main aspects of the EU-Mercosur economic relations. These aspects are foreign direct investment flows, trade and foreign aid.

Actions (login required)