On March 26, 1991, Brazil, Argentina, Uruguay, and Paraguay signed the Treaty of Asunción, establishing the Common Market of the South (Mercado Común del Sur—Mercosur) with the intention of strengthening sub-regional development and cooperation through economic integration. Since then, Mercosur has struggled to achieve deep economic integration, but has maintained a cooperative economic and political framework, which has also become an influential voice in determining the fate of the hemisphere's regional integration initiatives. In particular, the U.S. vision for hemispheric integration, the Free Trade Area of the Americas (FTAA), has stalled largely because of opposition from within Mercosur. Venezuela's July 2006 signing of an accession agreement only reinforces Mercosur as the undisputed economic counterweight to the United States in the region and raises further doubts over the prospects for a hemispheric-wide trade agreement. Venezuela signed an accession agreement on July 4, 2006 (discussed in detail below), but has been reticent to take on all commitments of the customs union, especially the CET. From the outset, Mercosur struggled to reconcile a basic inconsistency of partial economic union: how to balance trade integration and equity of member benefits, while retaining some semblance of national control over trade, production, and consumption structure. It also turned to the Mercosur system for dispute settlement. These constraints limit prospects for deep continental integration. Mercosur's other negotiations have experienced mixed success. deeper integration). South-South agreements and expansion of associate membership to South American countries has progressed, but only as limited market access arrangements. It appears that Mercosur has opted to emphasize its expansion both in the region and with other developing countries over agreements with its largest developed country trade partners, looking to the World Trade Organization (WTO) as the preferred alternative for achieving many of its trade policy goals. Nonetheless, U.S.-Mercosur commercial and economic ties are expanding and the United States is pursuing deeper bilateral trade relations with Uruguay that could provide new ideas for a broader integration commitment. The alternative may be for Mercosur and the United States to expand their mutually exclusive bilateral agreements, increasing the potential for overlapping trading systems, which few, if any, view as either economically or administratively optimal.
Mercosur is the Common Market of the South established by Brazil, Argentina, Uruguay, and Paraguay in 1991 to promote economic integration and political cooperation among the four countries. Since then, Mercosur has struggled to achieve deep economic integration, but has maintained a cooperative economic and political framework, which has also become an influential voice in determining the fate of the hemisphere's regional integration initiatives. In particular, the U.S. vision for hemispheric integration, the Free Trade Area of the Americas (FTAA), has stalled largely because of opposition from within Mercosur, which in turn has focused on its own, albeit limited, expansion.
The Mercosur pact calls for an incremental path to a full integration, but after 15 years, only a limited customs union has been achieved. From the outset, Mercosur struggled to reconcile a basic inconsistency in a pact of partial economic union: how to achieve economic integration, while also ensuring that the benefits would be balanced among members and that each country would retain some control over its trade, production, and consumption structure. This delicate balance faced overcoming serious structural and policy asymmetries that became clear when Brazil and Argentina experienced financial crises and deep recessions. These economic setbacks disrupted trade flows among members, causing friction, the adoption of protectionist measures, and a retreat from the commitment to deeper economic integration.
For now, Mercosur has turned to expanding rather than deepening the agreement. Many South American countries have been added as "associate members" and Mercosur has reached out for other South-South arrangements in Africa and Asia – all limited agreements and unlikely paths to continental economic integration. Internal conflicts have highlighted Mercosur's institutional weaknesses and slowed the integration process. On July 4, 2006, Venezuela signed an accession agreement to become its first new full member, making Mercosur the undisputed economic counterweight to United States in the region, but raising questions about how Venezuela's membership may shift regional political and trade dynamics.
It appears that Mercosur has opted to emphasize its expansion both in the region and with other developing countries over agreements with its largest developed country trade partners, looking to the World Trade Organization (WTO) as the preferred alternative for achieving many of its trade policy goals. Nonetheless, U.S.-Mercosur commercial and economic ties are expanding and the United States is pursuing deeper bilateral trade relations with Uruguay that could provide new ideas for a broader integration commitment. The alternative may be for Mercosur and the United States to expand their mutually exclusive bilateral agreements, increasing the potential for overlapping trading systems, which few, if any, view as either economically or administratively optimal.