MERCOSUR’s new conditions for common customs tariff will see light at end of June

Intensive and decisive days are coming for the future of MERCOSUR’s external relations. In around two weeks, the regional organization’s negotiating and technical teams will publish the new conditions for the common customs tariff

This topic has been occupying MERCOUR’s political and economic agenda since March 2021. Indeed, since the beginning of the year, Argentina, Brazil, Paraguay, and Uruguay are immersed in a crucial dialogue on trade and political agreements with third countries. In particular, the signing parties of the Treaty of Asunción are discussing a reduction of the common customs tariff with third countries, which can go from 0 up to 35%.

Whereas Uruguay and Brazil have been pushing towards a MERCOSUR, which is open to individual trade agreements between the Member States and third countries, Argentina gets behind caution and has intensively disagreed with such a measure. Paraguay, on its part, remains quasi-impassible in this debate, although tipping the scales in Uruguay and Brazil’s favour.

Brazil – The main hurdle for negotiation

We are liberals, but not stupid“. The position of the Brazilian Ministry of Economy is emphatic: Brazil is a founding Member State of MERCOSUR and is there to stay, but not at all costs. According to Paulo Guedes, the only way to modernize MERCOSUR is i) by reducing the common customs tariff to allow the entrance of imported products from other regions; and ii) by amending the Treaty of Asunción to allow for unilateral agreements with other regions or countries. As per the Minister, other strategies are not successful for the regional organization to engage in further levels of integration. However, it is not clear that such a strategy would equally work for all Member States apart from Brazil.

Uruguay – Bolsonaro’s accomplice

Abandoning the regional block is mission impossible“. Uruguay does not give up on integration but seeks to reshape its functioning. President Luis Lacalle Pou has shown his sympathy towards Bolsonaro’s policy on the common customs tariff, which focuses on national interests rather than real regional integration. Precisely, Julio César Lestido, president of the Uruguayan Chamber of Commerce and Services, has recently stressed out that Uruguay must broaden its international trade horizons beyond MERCOSUR’s framework by creating better conditions for investors in Uruguay than its neighboring competitors.

Argentina – Utmost caution as motto

We agree that integration is crucial, but integration must be understood as means and not as ends“. Argentina is in favor of joint strategies in MERCOSUR’s relations with third countries. Chancellor Felipe Solá calls for the draft of a proposal for a plan for external relations, bearing in mind the existing trade priorities of the regional block.

Argentina has insistently argued that free-riding strategies via unilateral agreements only undermine consensus and concord, which are, precisely, the core values of MERCOSUR’s whole establishment. Therefore, it stands up for a reduction of the common customs tariff only in specific sectors, such as telecommunications and industrial production.

Where is Paraguay?

Paraguay has not been very communicative with respect to the common customs tariff. The Member State has been calling for further opening of MERCOSUR for years, and it has supported the reduction of the common customs tariff in the same line as Brazil and Uruguay.

It seems that Argentina sits alone at the negotiating table against Brazil, Uruguay, and Paraguay.

The common custom tariff is just the first step

The debate on the common customs tariff is just one of the topics that make it evident that MERCOSUR is going through a new phase. After 30 years of existence, modernization must be seen as an adaptation to recent times rather than as a failure of the whole idea behind the project. Different policy styles and national interests hinder consensus, but the Member States must recall that other regional integration experiences have succeeded after a period of retrospection and intense negotiations. After all, Rome was not built in a day.

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