Paper Topic:

EU economic relation with MERCOSUR

EU economic relation with MERCOSUR

Introduction

MERCOSUR (Southern Common Market ) was established in 1991 as a customs union and common market between Argentina , Brazil , Paraguay and Uruguay Chile and Bolivia later joined as associate Mercosur members . Since mid-2000 , they have been engaged in negotiations with the EU to establish a free trade area covering both regions

History in the Making

On May 28 , 2004 , EU and MERCOSUR trade representatives convened in Guadalajara , Mexico to continue an ongoing negotiation process . MERCOSUR holds a comparative advantage in a wide range of agricultural

produce which composes more than half of its particularly strong in industrial and capital markets , such as automobiles , telecommunications and banking . Their complementary economies seem ideally suited for engaging in free trade , with each component of the bloc specializing in their specific fields of strength However , import quotas and tariffs , intended to protect MERCOSUR members ' infant industries as well as high cost European farmers present mountainous obstacles to the realization of any free trade agreement . At the May 28 summit , both sides tentatively agreed to open their markets to foreign competition . The EU and MERCOSUR have each shown a willingness to make difficult concessions in order to see their negotiations come to fruition

The Border is Closed

The European Union 's protectionist agriculture regulations insulate locally grown produce from foreign competition . Cultivatable land , a precious and scarce commodity on the continent , is extraordinarily expensive . Hence the European Parliament instituted subsidies , import quotas and tariffs to keep the region "s relatively inefficient agro-industry afloat by regulating prices on the European market . These policies have effectively kept MERCOSUR products out of the European market as the EU refused to negotiate on opening its markets up to foreign competition by the raising of its quotas and the lowering of its tariffs . However , European negotiations have recently made important concessions aimed at expediting the process . The EU Common Agricultural Policy of 2003 , which significantly reduced Europe 's farm subsidies coupled with an increase in import quotas and a lowering of tariffs have strengthened MERCOSUR 's confidence in the positive outcome of trade talks

Europe 's reluctant acquiescence to MERCOSUR 's demands is an attempt to pursue a strategy aimed at obtaining greater access to South American markets where European industries and sectors (such as automobile telecommunication , banking and computer production ) have excelled in the past and appear to have an even more prosperous future . Like its European counterpart , MERCOSUR has traditionally been averse to granting greater access to these markets , defending its protectionist policies with an infant industry argument . These industries are too small , it maintains , to compete in the world market , and therefore opening its borders at this time could destroy domestic firms . However , the South American Common Market has recognized the significance of Europe 's offer , and in return , has allowed for ever greater access to its telecommunication and banking industries

Partners in Decay

There is a downside to the growing ties between Europe and MERCOSUR Europe 's courting of MERCOSUR is...

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