NAFTA & Inter-American Trade Monitor
Produced by the Institute for Agriculture and Trade Policy
May 31, 1996
Volume 3, Number 11
Chile's request for associate membership in the Mercosur trading bloc (Argentina, Brazil, Paraguay & Uruguay) may result in an agreement as early as June 25. Mercosur representatives will meet with European Union (EU) representatives on June 11 and 12 to begin moving toward liberalizing bilateral trade in 2000, with the first accord set for signature in December. Mercosur is also negotiating with Bolivia, Ecuador, Peru and Venezuela. Brazil looks toward a "day not too far off, when Mercosur will be all of South America," according to Brazilian Foreign Minister Luiz Lampreia.
Chile has requested only associate membership in Mercosur because its external tariff is lower than that of Mercosur and Chile does not want to raise its tariffs, particularly as it negotiates other agreements with Mexico and Canada and continues to look toward future membership in NAFTA. Agricultural issues between Chile and Mercosur seem to have been resolved by an agreement to give Chile 17 years to open up its wheat market. Some issues of rules of origin and comparative preferences for countries outside Mercosur remain to be resolved. Plans for signing a Chile-Mercosur accord at the end of June could also be stymied by a dispute between Brazil and Uruguay over clothing imports. Brazil has demanded that virtually all clothing imports, including those from Mercosur nations, be begun and completed within a 30-day period, making commerce in clothing more difficult.
The EU is Mercosur's biggest foreign investor, and has moved to strengthen ties with Mexico as well. Foreign ministers of the Latin American Rio Group and the EU met in Bolivia in April. Mutual responsibility of consumer and producer countries for the illegal drug trade, and a strong emphasis on trade and investment were among the provisions of the 40- point Cochabamba Declaration issued at the end of their meeting.
Mexico and the EU are also in the process of negotiating a trade agreement. Mexico-EU trade has doubled since 1989, reaching $11 billion in 1995. The Mexican National Foreign Trade Bank predicted that a free trade zone with the EU would increase Mexico's exports by 20 percent.
Kevin G. Hall, "Key Issues May Delay Chile Mercosur Accord," JOURNAL OF COMMERCE, May 22, 1996; Raul Ronzoni, "Integration Halted by Friction Over Clothes Imports," INTERPRESS SERVICE, May 15, 1996; Marcela Valente, "Mercosur: the Genesis of a Future South American Bloc," INTERPRESS SERVICE, April 10, 1996; Juan Carlos Rocha, "Latin America Closer to Europe than to the U.S.A.," INTERPRESS SERVICE, April 16, 1996; Timna Tanners, "EU Agrees to Freer Trade," THE NEWS, May 14, 1996; "Gurria Pressing for EU Accord,' MEXICO UPDATE, May 22, 1996.
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