Regional Trade Agreement in South America

THE DCFTA-DR is a regional agreement with all parties that is subject to the “same obligations and obligations”, but each country establishes its own market access plan. The agreement replaces the preferential trade treatment granted by the United States to these countries under the Caribbean Basin Economic Recovery Act (CBERA), the Caribbean Basin Trade Partnership Act (CBTPA) and the Generalized System of Preferences (GSP). It liberalizes trade in goods, services, government procurement, intellectual property and investment, and addresses labour and environmental issues. Most commercial and agricultural products immediately reach duty-free status. In the rest of the trade, tariffs will be phased out over a period of five to twenty years. Duty relief will be delayed for the longest time for the most sensitive agricultural products. CAFTA-DR establishes rules for transitional safeguards, tariff rate quotas and trade capacity building. (26) The new leaders in Argentina and Brazil, as well as the suspension of Venezuela, have given Mercosur the opportunity to revive its original objectives, analysts said. The bloc resumed trade talks with the European Commission in 2017 and officials reached a historic draft agreement in June 2019, twenty years to the day after negotiations began.

The agreement, which abolishes tariffs on about 90% of Mercosur`s exports to the EU over a ten-year period and opens up public procurement to suppliers from both blocs, now needs to be ratified by all EU and Mercosur member states. Analysts warn that populist politicians and political interest groups on both sides of the Atlantic could once again delay progress. In South America, most of the trade scepticism comes from manufacturers, especially car manufacturers, which in the past were protected from European competition by high tariffs. In Europe, the agricultural sector is concerned about cheap imports from Mercosur countries. This is especially true in Belgium, France, Ireland and Poland, all of which have politically influential beef producers. Meanwhile, Brazil`s deputy economy minister announced that Mercosur was also negotiating free trade agreements with Canada and South Korea. The Andean Community is considered one of the most institutionalized regional agreements among developing countries. Its institutional structure is modelled on that of the European Community.

The institutions include a formal Andean Presidential Council, which meets regularly, a court with supranational powers, and an Andean integration system that includes all Andean integration agencies. (51) The experts claim that integration has been further stifled by the use of Mercosur economies that continue to resort to protectionist measures [PDF] and show reluctance to create value-added supply chains or regional production centres. Instead, Latin America`s traditional dependence on low-value-added commodity exports, particularly to China, continued during the commodity price spike of the 2000s. Many economists argue that this has contributed to the disappointing growth of trade within the bloc, which has declined since 1998 as a proportion of total members` trade. Regional trade agreements (RTAs) are trade agreements in which member states give each other preferential treatment in trade. RTAs can be classified as bilateral, multilateral or subregional. Without formal definitions, these terms are sometimes loosely used to describe different groupings. A bilateral trade agreement is usually an agreement between two countries to reduce tariffs and quotas for items between them.

Although this definition seems to refer to an agreement between only two countries, it is sometimes used to describe trade agreements involving more than two countries. On August 5, 2004, the Dominican Republic, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and the United States signed the DCFTA-DR. The agreement was ratified by six countries and had a target date for implementation on the 1st. January 2006, which was not respected. The Dominican Republic, El Salvador, Nicaragua, Honduras and Guatemala have experienced delays in drafting the agreement`s commitments into their national legislation, but are expected to do so in early 2006. Costa Rica has not ratified the agreement and may postpone ratification until after the presidential elections on 5 February 2006. (25) Customs unions are agreements under which members trade freely with each other and maintain a common commercial policy towards non-members. These agreements require the introduction of a common external tariff and the harmonisation of external trade policies.

Such agreements represent a greater loss of autonomy from the parties` trade policies and require longer and more complex periods of negotiation and implementation. Geographical considerations play an important role in defining the objective of economic and sometimes political integration between Member States. (4) The Southern Common Market (Mercosur) in South America is an example of a customs union. For much of the 1990s, Mercosur was the most dynamic economic subgroup in the Western Hemisphere in terms of trade growth among its members. Things changed at the end of the decade when Brazil faced a financial crisis and the devaluation of the Brazilian real in 1999. The economic situation also affected Argentina and caused a serious political financial crisis that ended the presidency of Fernando de la Rua. The slowdown in the economies of both countries has weakened the momentum towards further integration. Some questioned whether trade liberalization was partly responsible for the economic crises and whether further liberalization was feasible or beneficial to the economy. (45) In recent years, the Mercosur countries have been working on several trade initiatives.

Mercosur and the Andean Community of Nations (CAN) signed a Memorandum of Understanding in December 2004 to form an economic union similar to the European Union by 2019 (see section on the South American international community in this report). Mercosur has also advanced trade liberalisation with the EU. The 1995 Eu-Mercosur Interregional Framework Cooperation Agreement began preparations for negotiations on an interregional agreement that would include the liberalisation of trade in goods and services in accordance with WTO rules, as well as enhanced cooperation and political dialogue. .

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