By Estrella Gutiérrez
CARACAS, Apr 30 1997 (IPS)

The Andean Community and members of the Southern Common Market (Mercosur) are racing toward a 1998 deadline to reach agreement which will unite eight of the 10 South American countries in one liberalized trade zone.

The Andean Community comprises Bolivia, Colombia, Ecuador and Venezuela. Peru quit the community earlier this month, although that decision is still unofficial. Mercosur’s membership comprises Argentina, Brazil, Paraguay and Uruguay.

Besides Peru, Chile is the only Spanish-speaking South American country that does not belong to either regional organization although Chile enjoys a free trade zone agreement with Mercosur. Chile also has signed bilateral trade accords with Colombia, Ecuador and Venezuela.

Andean Community sources say that Peru’s new position as an outsider will make it difficult for that country to secure duty reductions with Mercosur members since Southern Cone countries have less interest in making special arrangements with a lone party. Furthermore, united fronts usually harden their bargaining position in negotiations with a single client.

If Lima indeed has decided to back out of trade liberalization with small and mid-sized economies like those of its Andean neighbors, then it will be even more difficult for Peru to initiate commercial opening with large-scale economies like those of Argentina and Brazil, the sources said.

The goal of duty reduction negotiations is to create a South American Free Trade Zone (SAFTZ) with the ten participating members operating a Free Trade Zone operating by the year 2005.

Negotiations between Mercosur and the Andean Community have been confused by intermittent discussion of “union” that goes beyond duty elimination and into the realm of political integration. Now that technicians have clarified the terms of free trade negotiation, however, the Andean Community hopes to conclude a pact in September or October of this year.

Commercial organizations from other countries and Venezuelan technicians explain that the liberalized trade pact is a “first generation accord”, which means it will be limited to duty elimination and the regulation of commerce.

The plan to eliminate tariffs and duties will coincide with jointly held norms concerning “country of origin” definition, safeguard devices and mechanisms for resolving disputes. All these elements are fundamental for any kind of basic economic opening that does not regulate services, investment, intellectual property or other areas of economic interest that would be natural components of more complex “third generation treaties.”

Liberalized trade agreements of the most advanced kind include all the themes dealt with by the Uruguay Round (1986-1995), that form the cornerstone of the World Trade Organization.

The North American Free Trade Act (NAFTA) linking Mexico, Canada and the United States – and the so-called Group of Three (Colombia, Mexico and Venezuela) – typifies wide-reaching accords that transcend the exchange of goods in order to give comprehensive treatment to issues such as labor and the environment.

During the Andean Presidents’ Council, held in Sucre, Bolivia April 22-23, participating heads-of-state confirmed that their foremost concern was to consummate an accord with Mercosur. To this end, Andean technicians will meet in Caracas on May 5-6. Participants will review ongoing progress of trade talks with special attention to last September’s agreement that negotiations would continue “block to block” in spite of Argentine reservations, and Uruguay’s flat- out opposition.

In the beginning, it was suggested that there be two parallel negotiations; one concerning terms of trade liberalization that would be managed “group to group”, whereas the other parallel negotiation concerning progressive tariff reduction would take place between Mercosur and each separate Andean country – the so-called “four plus one” approach.

In mid-May, those responsible for international trade in each of the eight countries working toward the Trade Zone merger will review the status of negotiations at their annual ministerial meeting of in Brazil.

At that meeting, functionaries will outline an accelerated pace for negotiations during the second half of 1997. Those future negotiations will result in a free trade zone that will begin actual operation in 1998.

Mercosur and the Andean Community are at a stage of development which technicians call “incomplete commercial integration process.” It is the purpose of these incomplete groupings to affiliate themselves in sub-regional common markets as a stepping stone to a larger comprehensive Latin American common market.

The Andean Community’s free trade zone is more complete than Mercosur’s since its list of duty-free exceptions is far shorter, However, Mercosur does enjoy more highly developed customs sharing procedures.

Institutionally, the Andean Community is more developed than Mercosur with member states which have collaborated for 28 years. Mercosur, on the other hand, took its first steps toward integration in 1991. Mercosur, however, is the most famous South American trade bloc due to the size of its combined economies and the rapid progress it has made. Mercosur is home to 200 million people and has a Gross National Product of 850 billion dollars, and shared trade of 10 billion.

The Andean Community – prior to Peru’s departure – is home to 100 million people, and has a GNP of 200 billion dollars with shared trade of 5 billion.

Excerpt: