MERCOSUR INTERNATIONAL TRADE NEGOTIATIONS
Considerations on the impacts of the Covid-19 crisis.
by Félix Peña
English translation: Isabel Romero Carranza
That of international trade negotiations is one of
the areas most exposed to the impact of the changes that are taking place
in the Mercosur environment. Before the current pandemic was unleashed,
the 2020 agenda of its international negotiations presented complex aspects,
in which it was possible to detect differences in criteria between the
four member countries.
One of the aspects where such differences could be perceived was in
the possibility of negotiating preferential trade agreements in which
not all member countries participated, thus being able to generate impacts
on intra-Mercosur trade and, above all, on the relative value of the existing
The debate that has been taking place in this regard often does not
take into account that the Treaty of Asunción formally establishes
a common market, with a customs union and with a common external tariff.
This implies the recognition that what one country granted to another
member country - for example, the zero tariff for reciprocal trade - cannot
be dissolved by unilaterally giving the same advantage to a non-member
country. This could only be done through an international agreement negotiated
and signed by all partners. Hence the need to jointly negotiate those
preferential trade agreements with third countries.
If an amendment to the Asuncion Treaty couldn't be concluded, and
a country or any number of countries wanted to reacquire the freedom to
individually define their international trade commitments, what would
be the alternatives moving forward? The international experience in matters
of integration has some precedents of what a country can do if the commitments
made with its partners in an integration agreement are no longer to its
advantage. One solution would be, for example, to withdraw from the agreement.
The convenience of adapting the methods used to build Mercosur to
the new global, regional, and domestic realities is now evident. This
would be a much better option than to abandon the political and economic
objectives, which led to its creation as a result of the initiative of
integration between Argentina and Brazil, to which Uruguay and Paraguay
As the days go by, there are global effects that the Covid-19 pandemic
is unleashing worldwide and in many countries, including of course the
As with any international crisis of the scale of the current one, it
is difficult to foresee its true dimension and the scope of the aftermath.
It also makes any diagnostic or forecast uncertain. Therefore, it is not
easy to predict what will be its profound impacts on the development of
the Mercosur (nor in the case of the EU), due to the multiple political,
economic and social effects that are already being observed in each of
its member countries, including of course its international trade insertion.
Thus, current times demand much caution in terms of the diagnoses and
of the strategies and actions that are undertaken, in particular by the
protagonists who have responsibilities at the governmental, business,
union, social, journalistic and academic levels. Analyzing the world around
us with approaches from the past, even the recent past, does not seem
to be advisable today.
International trade negotiations would seem to be the aspect most exposed
to the impact of the changes that are taking place in the Mercosur environment.
Before the current pandemic was unleashed, the 2020 agenda of its international
negotiations presented very complex aspects, in which it was possible
to detect differences in criteria between the four member countries. Some
of these differences seem to have accentuated in the context of the current
One of the aspects where such differences could be perceived was in the
possibility of negotiating preferential trade agreements in which not
all member countries participated, thus being able to generate impacts
on intra-Mercosur trade and, more importantly, on the relative value of
the existing trade preferences.
The debate that has been taking place in this regard, often overlooks
the fact that the Treaty of Asunción establishes a common market,
with a customs union and a common external tariff. Furthermore, in article
2 it establishes that "the common market will be based on the reciprocity
of rights and obligations between the States Parties" (we have analyzed
this topic in previous newsletters, including the March issue of this
This means that what one country has already granted to another member
country -such as the zero tariff for reciprocal trade - cannot later be
dissolved by unilaterally giving the same advantage to a non-member country.
This can only be done through an international agreement negotiated and
signed by all partners, hence the need to jointly negotiate preferential
trade agreements with third countries.
Can this commitment be canceled out or changed without modifying the Treaty
with the explicit agreement of all partners? From a legal point of view,
the answer is no. It could only be done by means of a Decision of the
Mercosur Council that would result, for example, from a modification of
Resolution 32/00 of the year 2000, as has sometimes been suggested. It
is a well known fact that all legal aspects can have clear political implications
In the case of Mercosur, the restriction agreed in the Treaty of Asunción
does not derive solely from theoretical considerations. It is the result
of the context in which the Treaty of Asunción was negotiated.
In addition to the weight that the "European model" had at the
time, let us remember that a backdrop was the concern of the partners
-especially Argentina and Brazil - that any of them would be tempted to
start a bilateral trade negotiation with the The United States, which
had already launched its Initiative of the Americas aimed at negotiating
bilateral free trade agreements with countries of the region.
Moreover, this could have been one of the reasons why Chile chose not
to accept the invitation to become a member of Mercosur. Later on this
country finalized its bilateral free trade agreement with the United States.
If, eventually, an amendment to the Treaty of Asunción were not
possible and one or several member countries wanted to reacquire the freedom
to individually define their international trade commitments, what alternatives
would be possible?
As we have pointed out before, in the international experience in the
field of integration, there are several precedents of what a country can
do if it considers the commitments made with its partners in an integration
agreement are no longer convenient.. There is the possibility of withdrawing
from the agreement: Brexit is a recent experience in this regard. Obviously,
this option has economic and political consequences, both for the country
leaving the agreement and for the countries that remain in it. However,
it is a much better option than continuing to be a member of a club which
is perceived as offering no benefits.
The fact is that now, once again, Mercosur is going through a difficult
time. These troubles have also been recurring in similar processes, even
in Europe. Despite the fact that these processes are meant to last forever,
they continually need to be updated and adapted to the changes in realities
that sometimes may even be influenced by the process itself.
A recurring question about these processes is whether they have a future.
It is possible to formulate it with respect to Mercosur and the question
has been asked many times in the case of the EU. It is being formulated
today again as a consequence of the effects that the Covid-19 crisis is
having in Europe. One of the reasons why such a question is frequently
asked is due to the fact that these are processes that continue to be
voluntary in terms of the participation of a specific country. If any
member considers that the process as such is not beneficial for them,
they are free to withdraw, following of course the rules that have been
previously agreed for that purpose.
The interpretation of the decision of the Argentine Foreign Ministry
not to continue participating in the negotiations of the new free trade
agreements that are being developed between Mercosur and a group of countries
(among them South Korea, Canada, and Lebanon), has produced numerous reactions
in Argentina, including strong criticism. It had a huge media impact in
the four member countries and was considered quite confusing. Even at
the highest governmental level it was necessary to clarify that the country
was not withdrawing from Mercosur altogether.
It all originated in the virtual meeting of the Mercosur Coordination
Committee on April 24 last. From what has transpired from the presentation
made by Jorge Neme, current Secretary of International Economic Relations,
after presenting his views on issues related to the origins and evolution
of Mercosur, he emphasized some specific points. In them we can find the
essence of the position of the Argentine Foreign Ministry during the current
juncture of the pandemic crisis regarding the idea of accelerating new
trade negotiations with a group of countries such as South Korea, among
The relevant points of the presentation were three:
- The first refers to the fact that the international crisis unleashed
by Covid-19, with its multiple impacts, means that, in the perspective
of the Argentine government, this is not the right time to dedicate
Mercosur efforts to move forward with other trade negotiations. Such
efforts should remain focused on completing the negotiating process
with the EU and EFTA;
- the second point refers to the fact that this position does not mean
that Argentina withdraws from the new negotiations forever;
- the third point is that Argentina would accept that other Mercosur
partners chose to accelerate the progress of the negotiations already
started, especially with South Korea. In this case, a logical conclusion
is that the four partners would need to find political and institutional
solutions in order to make future agreements that are negotiated with
the provisions of the Treaty of Asunción possible. We should
remember that its rules now prevent the negotiation and conclusion of
free trade agreements that do not include all the Mercosur member countries
A lesson to be drawn from this recent experience is that Mercosur will
continue to require much attention from all the sectors of its member
countries. The quality of the information and analysis on its development
will continue to be essential, especially now when it is evident that
a period of strong turbulence lies ahead. This fact will increase the
difficulties that the member countries may have to understand their own
situation in the international environment. When such difficulties are
made manifest in the relations with the neighboring countries, the domestic
economic and political consequences in each country may even be magnified.
At the Latin American level, the reform of Mercosur and its coordination
with the Pacific Alliance is, today, a priority. It would seem advisable
to achieve this objective without it being necessary to immediately introduce
fundamental reforms in the Treaty of Asunción, since it could pose
internal difficulties in member countries.
This would be feasible if dogmatic approaches to what a customs union
or a free trade area should be are not introduced. The combination of
political sense, economic pragmatism and legal flexibility would help
achieve concrete results, while ensuring the necessary predictability
of the agreed rules.
In any case, the convenience of adapting the methods used to build Mercosur
to the new global, regional, and domestic realities is becoming evident.
This would be better than abandoning the political and economic objectives
that led to its creation in 1991, as a result of the founding initiative
of integration between Argentina and Brazil and which was later joined
by Uruguay and Paraguay.
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Félix Peña Director
of the Institute of International Trade at the ICBC Foundation. Director
of the Masters Degree in International Trade Relations at Tres de Febrero
National University (UNTREF). Member of the Executive Committee of the
Argentine Council for International Relations (CARI). Member of the Evian
Group Brains Trust. More