TRADE: Mexico ‘Political’ in Approach to South American Bloc

By Mario Osava Reprint | | Print |

Mario Osava

RIO DE JANEIRO, Jul 7 2004 (IPS) - Mexican President Vicente Fox mad a splash in the South American media Wednesday when he announced his country’s intention to join the Mercosur trade bloc as an associate member as ”a first step”, but his objective could have more to do with politics than trade, say experts.

Brazil’s President Luiz Inacio Lula da Silva expressed support for the Mexican goal of negotiating a free trade agreement with Mercosur (Southern Common Market, comprising Argentina, Brazil, Paraguay and Uruguay) when he received Fox for a working meeting Wednesday in Brasilia.

The two national leaders left together Wednesday evening for the Argentine city of Puerto Iguazú, located at the triple border with Paraguay and Brazil, and home to the famed Iguazú Falls. There the presidents are taking part in the 16th Mercosur Summit, to last through Thursday.

Mercosur is the world’s third largest trade bloc after the European Union and the North American Free Trade Agreement (NAFTA), representing a market of 215 million people with a combined gross domestic product (GDP) of 1.44 trillion dollars.

Mercosur says it is about to sign a trade integration treaty with the Andean Community of Nations (CAN), which includes Bolivia, Colombia, Ecuador, Peru and Venezuela.

In Puerto Iguazú, the bloc’s officials have highlighted negotiations with the EU, which are to conclude in October, and the steps taken in dialogue with potential new allies, like China, South Korea, Egypt, and the countries of southern Africa.

It might sound ironic that Mercosur is so ambitious in its external negotiations when a new trade dispute between Argentina and Brazil erupted last week, revealing a weakness within the group itself, Mario Marconini, head of the Brazilian Centre for International Relations (CEBRI), told IPS.

Argentina decided on Monday to limit imports of Brazilian-made appliances, such as refrigerators and washing machines, in order to contain what it saw as an ”invasion” of the products – a move that cast a cloud over the Puerto Iguazú summit.

Fox’s initiative, meanwhile, seems to entail ”more rhetoric than practical effectiveness,” and a focus on political interests, an area where the Mexicans have shown great capacity for action recently, said Marconini.

The Mexican announcement is seen as a response to a time of relative ”distancing” from the United States, Mexico’s partner, with Canada, in NAFTA.

A free trade agreement between Mexico and Mercosur would be difficult, considering that for the more open Mexican economy the adjustment would be relatively easy, but not for the South Americans.

For example, said Marconini, the tariff preference accord between Brazil and Mexico includes just 900 products out of a possible 11,000 because of different degrees of trade openness.

The Mexican government’s statement and the ”abundant delegation” it sent to Brazil and to the summit are surprising, said Darío Alessandro, Argentine coordinator of the Mercosur policy consultation forum.

The truth is that Mercosur ”is emerging as a very strong political force” and Mexico ”is an important actor, which would not be counterproductive to integrate into the bloc” if it completes the necessary steps, Alessandro said in a conversation with IPS.

Fox is not the only non-Mercosur president to take part in the summit. Venezuela’s Hugo Chávez will be on hand. He, too, wants his country to join Bolivia, Chile and Peru in holding associate member status.

There are two possible interpretations for Fox’s announcement, according to Cristina Pecequilo, researcher at the Centro Universitario Iberoamericano in Sao Paulo.

The most likely is that Mexico feels the need to seek out new trade partners and benefits after experiencing the limitations of NAFTA, she told IPS.

The second is a more unrealistic ”conspiracy” hypothesis, in which the aim is to ”debilitate Mercosur,” she said.

Mexico needs to develop ways to improve the lives of its 100-million strong population, as the 10 years since NAFTA took effect have been disappointing on that front, and the George W. Bush administration has not paid much attention to the immigration and transportation problems along their shared border, said the researcher.

Bilateral relations also became more difficult when Mexico, standing up to pressure from Washington, did not support the U.S.-led invasion of Iraq in 2003, she added.

Mercosur should be cautious about the agreement Fox is proposing, said Pecequilo, because it would be ”less advantageous” for the bloc, precisely because of the different degrees of openness of their markets.

It would have a negative strategic effect on Brazil because it would imply ”changing the focus of foreign policy, which until now was centred on South America. Extending it to all of Latin America would make deeper integration more difficult,” she said.

Marconini, meanwhile, points out that a trade agreement would not make Mexico a ”springboard” to help Mercosur exports reach the United States. NAFTA’s rules of origin are very strict, he said.

Although Fox said in numerous interviews with the local Mercosur media that he would like Mexico to be an associate member of the bloc, he stressed that a free trade accord is not in the works.

A trade agreement and signing the bloc’s democracy clause are considered requisites for associate membership.

The CEBRI director thinks that Mercosur, already suffering its own internal problems, is going too fast – and with a dose of ”ingenuousness” – in announcing negotiations on so many fronts, some of which are obviously non-viable, he said, like a supposed free trade agreement with China.