♠ Posted by Emmanuel in Latin America,Trade
at 7/31/2012 01:09:00 PM
Well I guess you should never say never: Hot on the heels of Russia joining the WTO after eighteen long years of negotiating its membership (or what passes for it), Venezuela is finally going to join MERCOSUR (Mercado Comun del Sur or the Common Market of the South). For a long time, right-leaning Paraguayan policymakers held back Venezuelan membership over ideological differences. In an interesting twist of fate, these right-leaning lawmakers summarily impeaching the left-leaning Paraguayan President Fernando Lugo earlier this year actually hastened the process of Venezuelan MERCOSUR participation. You see, Paraguay got kicked out of the group for its actions at the end of June:
Mercosur responded by banning Paraguay from attending a summit in Argentina this week. Brazilian Foreign Minister Antonio Patriota said that punishment would stand until democracy was fully restored in Paraguay. Paraguay's Senate removed Fernando Lugo from office last Friday in an impeachment trial that lasted a matter of hours, prompting criticism in the region and beyond.The removal of right-leaning Paraguayan lawmakers from the picture in turn enabled MERCOSUR to move towards finalizing Venezuelan membership, which comes into effect today:
A clause calling for democracy in the Mercosur bloc "first refers to the suspension of (a country's) participation in meetings, and then there's a second phrase on the suspension of rights and obligations," Patriota told reporters at the trade gathering in Mendoza, a small city in western Argentina.
Venezuela's socialist President Hugo Chavez shares such ideals but his country's membership, pending since 2006, had been blocked because it did not have the support of Paraguay's Congress, dominated by rightist parties. The decision last month to allow Venezuela's entry into Mercosur stirred further controversy within the group and fueled criticism that it has become little more than a political club for left-leaning leaders who harbor ambitions of Latin American unity.All I can say is, those right-leaning Paraguayan lawmakers may have won the battle in domestic politics, but lost the war in regional politics as their arch-nemesis Hugo Chavez waltzes into MERCOSUR. No such a good job, eh, boys? The irony is certainly not lost on Latin American followers.
When the same Congress ousted leftist President Fernando Lugo in a lightning-quick impeachment trial in June, the other Mercosur countries suspended Paraguay from the trade bloc and took advantage of its absence to let Venezuela in. Mercosur will formally welcome Venezuela into the fold at a presidential summit in Brasilia on Tuesday.
That said, keep in mind that trade creation is increasingly no longer the principle this so-called customs union abides by as all sorts of exemptions and opt-outs have been implemented by member countries in recent times contrary to our understanding of how it operates:
When Mercosur got its start, the only products that were exempted from free trade were automobiles and sugar. All other goods were supposed to be traded freely within the bloc or gradually stripped of duties, a goal that was largely met until Argentina expanded the use of non-automatic import licenses in 2011 and imposed a new system to pre-approve nearly all purchases abroad in February. Last month, Brazil and Argentina got Mercosur's approval to raise import tariffs on up to 200 products of their own choosing, further diluting the objective of a common tariff, on the grounds that each nation must protect its industry as economies get hit by fallout from Europe's debt crisis.
Trying to safeguard its cherished trade surplus, Argentina has used the non-automatic licenses and new approvals system to block imports, affecting goods such as farm machinery and textiles from Brazil and shoes and food products from Uruguay. It is a clear violation of Mercosur norms, but the response from within Mercosur has been muted grumbling and a raft of reprisals by Brazil's government, which like Argentina is under pressure to revive flagging local industry.
Elsewhere in the article, there are all sorts of sob stories about firms locating within MERCOSUR to take advantage of duty-free trade now being hurt by member countries reneging on such commitments. So now you know the answer to the trivia question, "When is a customs union not a customs union?" Given the now-questionable operation of the customs union [sic], what does MERCOSUR have left to offer? Certainly there are political motives behind Venezuela's inclusion. Critics blankly state that MERCOSUR is becoming a club of leftist leaders with interventionist policies:
The decision last month to allow Venezuela's entry into Mercosur stirred further controversy within the group and fueled criticism that it has become little more than a political club for left-leaning leaders who harbor ambitions of Latin American unity.
That seems to be a pretty accurate characterization of what MERCOSUR has degenerated into.
