MERCOSUR

Definition

MERCOSUR, or the Southern Common Market, is a regional trade bloc in South America aimed at promoting free trade and economic integration among its member countries, which include Argentina, Brazil, Paraguay, Uruguay, and Venezuela. Established in 1991, MERCOSUR seeks to create a common market by facilitating the movement of goods, services, and factors of production among its members while also establishing a customs union to impose common external tariffs on non-member countries.

5 Must Know Facts For Your Next Test

1. MERCOSUR was established by the Treaty of Asunción in 1991, promoting economic cooperation and integration among its member states.
2. The bloc's initial purpose was to facilitate trade by eliminating tariffs on goods traded between member countries and establishing a common external tariff for imports.
3. MERCOSUR has expanded its influence by including associate members and forming agreements with other regional groups like the European Union.
4. In recent years, MERCOSUR has faced challenges, including political instability in member states and differing economic policies that have complicated deeper integration.
5. MERCOSUR plays a significant role in the global economy as one of the largest trading blocs in Latin America, contributing to both intra-regional trade and exports to external markets.

Review Questions

• How does MERCOSUR exemplify the concept of a customs union within the context of regional integration?
  • MERCOSUR exemplifies a customs union by allowing its member countries to engage in free trade amongst themselves while implementing a common external tariff on goods imported from non-member nations. This structure facilitates easier trade among member states, as tariffs are removed for internal trade. At the same time, the common external tariff provides collective bargaining power in international trade negotiations, thereby strengthening the bloc's economic position on the global stage.
• Discuss the challenges faced by MERCOSUR in achieving deeper economic integration among its member countries.
  • MERCOSUR faces several challenges in achieving deeper economic integration due to varying political climates and economic policies among its member states. For instance, shifts in government priorities can lead to inconsistent commitment to MERCOSUR's objectives. Additionally, internal disagreements over tariffs, trade rules, and policies can hinder progress toward more robust economic cooperation. These issues can create tension within the bloc and impact its effectiveness as a unified entity in global trade.
• Evaluate the potential impact of MERCOSUR's agreements with external entities like the European Union on its member states' economies.
  • The potential impact of MERCOSUR's agreements with external entities such as the European Union could be substantial for its member states' economies. These agreements may lead to increased foreign investment and access to larger markets for MERCOSUR countries. However, they also pose risks such as increased competition from European products that could threaten local industries. Therefore, while such agreements could enhance economic growth and diversification for MERCOSUR members, careful consideration of their domestic economic strategies will be essential to mitigate adverse effects.

Related terms

Customs Union:

A trade agreement where member countries eliminate tariffs on trade between themselves and establish a common external tariff on imports from non-member countries.

Free Trade Area:

A region where a group of countries agrees to reduce or eliminate trade barriers among themselves while maintaining individual tariffs against non-member countries.

Common Market:

An advanced form of economic integration that not only allows for free trade among member countries but also includes the free movement of labor and capital.