MERCOSUR: Integration Beyond Trade

By Mario Osava Reprint | | Print |

Mario Osava

RIO DE JANEIRO, Oct 14 1996 (IPS) - The Southern Common Market (Mercosur) has recently taken major steps toward leaving behind its almost exclusive concern with trade.

“More complex and profound matters” will occupy the attention of the Mercosur — Argentina, Brazil, Paraguay and Uruguay — over the next five years, after the initial period of focusing on increasing trade within the free trade bloc, predicted Argentina’s secretary of international economic relations, Jorge Campbell.

Defence, unions, tax policy, Bolivia and extra-regional relations were incorporated into the Mercosur integration process — often considered Latin America’s most dynamic — in meetings and events last week.

Negotiations on a free trade accord with Bolivia concluded Friday in Brasilia, and unprecedented joint military manoeuvres between the Argentine and Brazilian armies, long-time enemies, began Saturday in Argentina.

The main union organisations of the bloc’s four member nations, meanwhile, agreed in Sao Paulo to hold simultaneous protests against unemployment and the effects of globalisation, to begin on Dec. 17, parallel to the upcoming summit of Mercosur presidents.

The Common Market Group, the Mercosur’s executive body, also confirmed last week an intense time-table for extra-regional negotiations.

A framework accord with the Andean Community — Bolivia, Colombia, Ecuador, Peru and Venezuela — to be signed in December will be drawn up during two meetings to be held this month with representatives of that bloc in Montevideo and Lima.

The accord will pave the way for free trade to begin to go into effect between the two blocs next year. That will extend commercial integration throughout nearly all of South America. The joint Mercosur-European Union Trade Commission will also meet Nov. 5-6 in Belo Horizonte, Brazil to start converting a framework accord signed last year into reality.

Brazil’s Foreign Ministry reported that three working groups will be created in Belo Horizonte, to discuss goods, services and areas of trade.

The first meeting between the Mercosur and the Community of Independent States will also take place in November. The alliance of former Soviet Union republics is interested in bilateral talks with the Southern Cone trade union. Japan began such conversations with the Mercosur early this month.

The joint military exercises between the bloc’s two largest members, the first since the end of the war in which Argentina and Brazil allied themselves with Uruguay to attack Paraguay 130 years ago, are focused on shared peace-keeping missions and possible ties in the area of defence.

The unions, weighed down with growing unemployment in all four nations, also decided to join forces. Labour leaders meeting last week in Sao Paulo gave new life to a coordinating committee of Southern Cone union federations that was created in 1986, and began to plan simultaneous protests in the four countries and wherever important Mercosur meetings are held.

The unions aim to influence Mercosur negotiations as well as talks for the Free Trade Area of the Americas (FTAA), from which they have been left out up to now, according to Vicente Paulo da Silva, president of Brazil’s Central Workers Union (CUT).

The unions must globalise their efforts in the face of today’s “irreversible economic globalisation,” said Luiz Inacio Lula da Silva, leader of Brazil’s Workers’ Party (PT).

Last week’s Argentine-Brazilian negotiations in Brasilia on trade and investment also reflected the new depth of the Mercosur integration process.

Argentina’s initial concern in the talks was commercial. That nation’s secretary of industry, commerce and mining, Alieto Guadagni, expressed his alarm regarding the enormous growth in Brazilian exports to his country registered in August, a phenomenon that put an end to a trade surplus enjoyed by Argentina of more than 100 million dollars a month over the past two years.

The competition for foreign investment also came to light during the discussions, which led to tax questions. Brazil’s states are in the midst of a “fiscal war,” offering ever greater tax exemptions and concessions to attract new industrial plants.

The competition between Brazil’s states affects the rest of the Mercosur, because foreign companies attracted by the bloc’s expanded market can install themselves in any of the countries.

“The coordination of tax exemptions will have to be discussed,” said Guadagni, who prior to being named to his current post was Argentina’ ambassador to Brazil.

Argentina is interested in the integration of financial and tax legislation.

Brazil’s state governments have autonomous tax systems which interfere with Mercosur functioning. The northeastern state of Pernambuco, for example, protects its mills by taxing wheat flour from outside its territory. The measure is intended to block the entry of flour from other states. But it also affects Argentina and violates Mercosur agreements, Guadagni said.