Mercosur

Definition

Mercosur, or the Southern Common Market, is a regional trade bloc in South America that promotes economic integration and cooperation among its member countries: Argentina, Brazil, Paraguay, and Uruguay, with Venezuela currently suspended. Established in 1991, Mercosur aims to create a common market through the elimination of tariffs and the promotion of free trade, while also addressing issues like political dialogue and social development among its members.

5 Must Know Facts For Your Next Test

1. Mercosur was officially founded with the signing of the Treaty of Asunción in 1991, promoting not just economic but also political cooperation.
2. In addition to member countries, Mercosur includes associate members like Chile and Bolivia, which participate in various agreements but are not full members.
3. Mercosur's goal is to establish a common market by reducing trade barriers, allowing for free movement of goods, services, capital, and labor among member states.
4. The bloc faced challenges due to political changes within member countries and differing economic policies, impacting its effectiveness in promoting regional integration.
5. Mercosur has also engaged in external negotiations with other trade blocs and countries, attempting to expand its influence beyond South America.

Review Questions

• How does Mercosur exemplify the principles of regional integration and what are its main goals?
  • Mercosur exemplifies regional integration by bringing together several South American nations to foster economic cooperation through a common market. Its main goals include eliminating tariffs on intra-regional trade, promoting free movement of goods, services, capital, and labor among member countries. This integration enhances economic interdependence and aims to improve the overall welfare of its member states by creating a larger market.
• Discuss the role of Mercosur as a customs union and the implications this has for its member states' trade policies.
  • As a customs union, Mercosur allows its member states to eliminate tariffs on goods traded within the bloc while imposing a common external tariff on imports from non-member countries. This structure simplifies trade among members by providing uniform rules and reducing costs, but it also means that member states must coordinate their external trade policies. Consequently, individual countries may have less flexibility in negotiating separate trade agreements with non-member nations.
• Evaluate the challenges faced by Mercosur in achieving effective regional economic integration and how these challenges might impact its future.
  • Mercosur faces several challenges in achieving effective regional economic integration, including political instability within member countries and differing economic policies that hinder cooperation. These issues can lead to reduced effectiveness in implementing agreements and may cause tensions among members regarding trade negotiations. Furthermore, external pressures from competing trade blocs can limit Mercosur's influence. Addressing these challenges will be crucial for the future viability of Mercosur as a significant player in global trade.

Related terms

Regional Integration: The process by which countries in a geographic region increase their economic interdependence through trade agreements and shared policies.

Customs Union: An agreement between countries to eliminate tariffs on goods traded among them while maintaining a common external tariff against non-member countries.

Trade Liberalization: The removal or reduction of trade barriers such as tariffs and quotas to encourage free flow of goods and services between countries.