EU External Trade MERCOSUR

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EU External TradeMERCOSUR
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Historic Rundown

• EU - MERCOSUR trade relations are in the form of
  bilateral ties and multilateral co-operation
  within the framework of WTO.
• Mercosur Argentina, Brazil, Paraguay and Uruguay
  in March 1991 Venezuela in process of joining
• EU has supported Mercosur from the very
  beginning. 1992
• Inter-institutional Agreement
• The 1995 US project to create a Free Trade Area
  of Americas (FTAA)
• Impetus for LATAM EU
• FTAA perceived as threat to EU regional
  interests, leading to 1995 Interregional
  Framework Co-operation Agreement
• Framework agreement enters into force 1999
• Fostering political dialogue, co-operation and
  trade issues.

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Statistical Overview

• EU is MERCOSURs largest partner for trade and
  investment
• 1/3 of MERCOSUR trade is with EU compared to ¼
  with US.
• MERCOSUR is the EUs 9th largest trade partner.
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• 2 EU exports 
• 3 EU imports 
• i.e. The importance of the EU to MERCOSUR is
  disproportionately large 

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Capital Account/Levels and Types
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Significance of EU as Trading Partner

• The European Union has been able to increase its
  market share, whereas the US share remained
  rather constant and that of Japan and the rest of
  Latin America has declined. Thus despite the the
  existence of the North American Free Trade
  Agreement, the EUR is currently MERCOSURs main
  supplier. (Holland 2002157)

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Principles and Objectives (1)

• EU used its influence as a major trade partner of
  Mercosur and its position in the 1990s as the
  biggest single aid donor to Latin America as a
  vehicle to promote democratic reform and
  citizenship.
• The EU believes the two trading blocs have a
  great deal in common in terms of languages and
  culture. Therefore the EU feels it is in a unique
  position to offer Mercosur countries advice,
  guidance and policy assistance. 
• This approach has been examined by
  constructivists who highlight it as an example of
  the importance of norms and ideas in affecting
  international and domestic policy, through two
  main processes persuasion and social influence.

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Principles and Objectives (2)

• However there are several problems
• It is not clear that democracy is understood in
  the same way in Mercosur as in EU. The different
  histories and experiences of the Latin American
  countries have not been taken into consideration.
• The identity of the state actors in the Mercosur
  member states have been largely misunderstood by
  the EU. The elites of these countries do not
  always see their duty as protecting the rights of
  poor.
• The importance of non-state actors in the
  Mercosur member states has been underestimated.
  These organisations have been involved in short
  term aid programmes, but should maybe have a more
  central role.

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Power from Trade/Power to Trade

• New international trade
• Behind-the-boarders/deepening (Holmes), shift in
  power balance (BRIC), technicalization (Uruguay)
  (De Bièvre) - WTO a European mission? (Baldwin
• EU trade significance/liberalization leader
• Penetration/Single market/Lisbon/MacSharry CAP
  reforms
• Members do not see sovereignty further curtailed
• Article 133
• Not a clear cut case organizational issues
  what is the EUs real policy (Baldwin)
• Union vs. Community policy making (Smith)

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Contd

• MERCOSUR/the B in BRIC
• Increasing (diplomatic influence in multi-lateral
  trade regime
• E.g. Positive-list approach wrt GATS Hoekman and
  Kostecki)
• Higher stake than prior to WW2 e.g. Agriculture
  sector
• Globalisation undermines EUs position (Young
  Peter)

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EU Agenda

• Trade the only effective FP tool
• Kissinger jibe does not apply
• Incorrect realist focus on CSFP (Santander)
• Neo regionalism/Neo interregionalism (Higgott)
• EU-Mercosur relationship build on overall EU
  needs
• Singapore principles (competition policy,
  investment, government procurement and trade
  facilitation - as well as environmental
  protection and core labour standards)
• deep trade agenda/liberalization

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MERCOSUR Agenda

• Econometric analysis shows clear welfare gains
  for MERCOSUR in FTA w/ EU
• Monteagudo and Watanuki / Philippidis and Sanjuán
• Multilateralism policy falling in line with
  BRIC
• Oppose deepening
• Problems with CAP
• Protective member states neutralize EU
  developmental efforts (Young Peter)

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US Encroachment

• FTAA - Intrusion in EU interests
• Two-track US policy (multilateral and regional)
  threatening to squeeze EU out (Santander)
• Solution convergence/divergence FP thesis
  rapprochement Madrid 95
• Cancun multilateral failure so
• Race to bilateral ties
• US insisted on agricultural agreement within WTO
  (not to liking of Mercosur)
• EU pursues more interregional track

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From the US to regionalism

• Traditionally weaker position in WTO vs. US
  (historic determination)
• Shift away from mulitlateralism/attempt to gain
  influence
• Bargaining/strategic competition
• Union/Community Competition for regions
• Experience in regionalism as advantage (Thurow)
• More clout in Washington thanks to involvement in
  Americas (Allen Smith)

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Main References

• Thurow, L. (1992) Head to Head The Coming
  Economic Battle among Japan, Europe and America,
  New York Morrow
• Smith, M (1998) Competitive Cooperation and EU-US
  relations JEPP
• Philippidis, G. and Sanjuan, A (2007) An Analysis
  of Mercosur's Regional Trading Arrangements The
  World Economy, 30/3
• The European Partnership with Mercosur a
  Relationship Based on Strategic and Neo-liberal
  Principles Sebastian Santander, journal of
  European integration, 2005
• Grugel, J. Democratization and ideationla
  diffusion Europe Mercosur and Social
  Citizenship, JCMS, 2007
• Gibb, R (2000) Post Lomé The European union and
  the South, Third World Qarterly 31/3
• Alasdair R. Young John Peterson, (2006) The EU
  and the new trade politics, Journal of European
  Public Policy, Vol 13/6
• Baldwin, M (2006) EU trade politics - heaven or
  hell? The EU and the new trade politics, Journal
  of European Public Policy, Vol 13/6
• Holland, M. (2002) The European Union and the
  Third World. New York Palgrave.  
• EU External Relations (2005).The EUs relations
  with MERCOSUR. http//ec.europa.eu/external_relati
  ons/mercosur/intro/index.htm
• Select Committee for Trade and Industry Seventh
  Report-Mercosurs Future, Trade Relations with
  the EU, The Doha Round.
• EC delegation to Uruguay and Paraguay-Based on
  Eurostat information-http//old.delury.cec.eu.int/
  imagenes_adjuntos/pdfs/en_mercosurUE20mayo202005
  .pdf.
• EU bilateral trade-Eurostat-http//trade.ec.europa
  .eu/doclib/docs/2006/september/tradoc_113488.pdf.