BUENOS AIRES – Mercosur will meet in Santa Fe, Argentina, this week for its first biannual summit since clinching a long-anticipated free-trade deal with the European Union.
Among the items on the agenda for the South American trade bloc are the accession of Bolivia as a full member and the still-unresolved crisis in Venezuela, which was indefinitely suspended from the organization two years ago.
1. LONG-AWAITED FREE-TRADE DEAL
Argentina, which has held the bloc’s six-month rotating presidency since Dec. 18, 2018, will present the key achievement of its tenure – a broad Strategic Association Agreement signed with the EU on June 28 in Brussels – at the bloc’s 54th Summit of Heads of State from July 15-17.
That deal, which will create one of the world’s largest free-trade zones, is the culmination of a complex process that lasted 19 years and required nearly 30 rounds of negotiations.
The talks stalled on more than one occasion due to political and economic fluctuations on both sides of the Atlantic during those two decades.
The agreement will take effect once it is ratified by the national legislatures of the member countries of both blocs, a process that could take at least two years.
But in the case of Mercosur, the accord is a victory that extends beyond its potential economic impact and marks the end of a years-long drought without any significant trade deal being reached.
2. TOWARD A MORE MODERN MERCOSUR
The agreement with the EU provides a much-needed boost to the bloc founded in 1991 by Argentina, Brazil, Paraguay and Uruguay, considering lackluster intra-regional trade flows and constant demands by some members for the bloc to loosen its regulations and even allow them to negotiate bilateral trade deals outside the framework of Mercosur.
In that regard, Argentina has been promoting an agenda aimed at “modernizing” the bloc, including an institutional reform proposal that seeks to enable it to operate more efficiently.
3. REVIEW OF THE COMMON EXTERNAL TARIFF
The bloc is in the process of reviewing its Common External Tariff (CET) regime, the different levies imposed for more than a quarter century on imports entering the South American common market.
An across-the-board reduction of the CET, particularly on capital and intermediate goods that are imported for manufacturing processes, would make Mercosur more competitive by lowering the costs of some production chains with export potential.
The bloc’s top CET is 35 percent, but the average level applied is 11.5 percent; the levy, however, ascends to 20 percent for some intermediate goods.
4. OTHER ONGOING NEGOTIATIONS
Besides signing the trade deal with the EU, Mercosur also made progress with other external negotiations during the first half of the year.
One process now in an advanced stage is being conducted with the European Free Trade Association (EFTA), made up of Iceland, Norway, Switzerland and Liechtenstein, with the most recent negotiating round having taken place in June in Geneva.
The South Americans also are holding free-trade talks with Canada.
During the fifth round of negotiations in Ottawa in March, key progress was made on chapters such as trade facilitation, good regulatory practices and intellectual property.
Mercosur has set a goal of reaching a final deal before year’s end.
The bloc also is eying an accord with South Korea, a process that marks its first trade negotiations with an East Asian nation.
A broad agreement is being worked out that includes trade in goods and services, public procurement, investments, e-commerce and other areas, with the goal of having the deal signed some time in 2020.
The most recent negotiation process – launched in April – is being carried out with Singapore, the first Association of Southeast Asian Nations (Asean) member with which Mercosur is seeking an trade accord.
5. TOWARD THE FULL INCORPORATION OF BOLIVIA
The process for Bolivia’s accession as a full member of Mercosur is still pending.
The Protocol of Accession to Mercosur of the Plurinational State of Bolivia was signed in July 2015, but it still needs to be ratified by Brazil’s Congress before it takes effect.
Under the terms of the protocol, Bolivia would have four years – from the date it enters into force – to incorporate all of the bloc’s regulations and its CET regime.
6. VENEZUELAN CRISIS ALWAYS ON THE AGENDA
The socioeconomic and political crisis that has racked Venezuela since 2013 has dominated Mercosur’s political debates over the past three years.
On Aug. 5, 2017, Mercosur finally suspended Venezuela from the bloc after determining that the actions of leftist incumbent Nicolas Maduro’s regime constituted a breach of the democratic order.
The position of the bloc’s full members with respect to the situation in Venezuela, however, is not unanimous.
Uruguay has joined with Mexico, Bolivia and the Caribbean Community to activate the Montevideo Mechanism, an initiative to promote political dialogue in Venezuela, and has not recognized the speaker of Venezuela’s National Assembly (unicameral legislature), opposition leader Juan Guaido, as acting president of the oil-rich nation.
By contrast, Argentina, Brazil and Paraguay recognize Guaido as the country’s legitimate leader and are members of the Lima Group, which has adopted a harsher stance against Maduro’s regime.
7. DOMESTIC AGENDAS WEIGH ON MERCOSUR
Mercosur’s progress has been hampered at times by its member countries’ domestic agendas.
On this occasion, Uruguay and Argentina are both immersed in presidential races, with the first round of balloting in both countries scheduled for October.
In Argentina, incumbent conservative head of state Mauricio Macri is trying to win re-election despite that nation’s lengthy recession.
Brazil, meanwhile, is set to assume the rotating presidency of Mercosur on Wednesday amid a complicated internal scenario that includes criticisms of the policies of rightist President Jair Bolsonaro and tepid economic growth.