NAFTA & Inter-American Trade Monitor
Produced by the Institute for Agriculture and Trade Policy
July 12, 1996
Volume 3, Number 13
On June 25, Chile signed an agreement to become an associate member of Mercosur, the Southern Cone Common Market. With Bolivia's membership, expected to be finalized within 90 days, the size of the trade bloc will increase to 210 million people in six nations: Argentina, Bolivia, Brazil, Chile, Paraguay and Uruguay. With Chile's accession to Mercosur, the trading bloc gains access to the Asian Pacific region, a growing market for Latin America.
Beginning October 1, Chile will lower tariffs on most Mercosur trade, beginning with a 40 percent tariff cut and eliminating all duties on intra-bloc trade within eight years, with some exceptions to protect Chile's agricultural sector. Environmentalists and some agriculture groups still oppose the accord, arguing that lack of labor and environmental provisions will lead to replacement of traditional crops by intensive lumbering and consequent displacement of rural workers.
As an associate member of Mercosur, Chile will maintain its own uniform 11 percent external tariff, rather than harmonizing with Mercosur's varied external tariffs, which average 13 percent. Chilean exports rose 11.4 percent in 1995, to $16 billion of the gross domestic product of $66.7 billion. Chilean efforts to join the North American Free Trade Agreement have been put on hold because of the U.S. delay in negotiating new trade agreements, but Chile is expected to sign a separate trade agreement with Canada this year.
Late last year, the European Union signed a framework agreement for a trade pact with Mercosur, scheduled to be finalized in 2005. With Mexico resisting the Clinton administration proposal for negotiations with Mercosur, Commerce Undersecretary for International Trade Stuart Eizenstat said Canada and the United States might begin talks on hemispheric integration with Mercosur "on a four-plus-two basis."
Calvin Sims, "Chile Will Enter a Big South American Free Market," NEW YORK TIMES, June 26, 1996; David Pilling, "Bolivia to Sign Free Trade Pact With Mercosur," FINANCIAL TIMES, June 26, 1996; David Pilling and Imogen Mark, "Jilted Chile Hitches Up to Mercosur," FINANCIAL TIMES, June 25, 1996; Paula L. Green, "Tired of Waiting for US, Chile Seals Deal to Join Mercosur Bloc," JOURNAL OF COMMERCE, June 24, 1996; Richard Lawrence, "US Wants Nafta-Mercosur Talks," JOURNAL OF COMMERCE, June 24, 1996; Gustavo Gonzalez, "Agriculture's Cold Feet Will Not Hamper Approval," INTERPRESS SERVICE, June 26, 1996; Marcela Valente, "Looking Toward the Asia-Pacific Rim," INTERPRESS SERVICE, June 23, 1996; "U.S. Seeks NAFTA- Mercosur Talks Without Mexico, Eizenstat Says," INSIDE U.S. TRADE, June 28, 1996.
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