Małgorzata Dziembała

University of Economics in Katowice, Department of International Economic Relations

malgorzata.dziembala@ue.katowice.pl

Abstract

The EU is currently promoting interregionalism by establishing various economic relations with extra-European countries and groupings, including those in Latin America. The aim of this paper is to discuss trade and investment relations between the EU and Mercosur countries, as well as the institutional basis for realised economic cooperation and perspectives for its development. It is said that the free-trade agreement between the two groupings which is currently being negotiated should intensify mutual economic relations and at the same time strengthen the EU’s global position.

Relations, including economic relations, between Mercosur and the EU are deepening, which can be seen in both the volume of trade and the infl ux of foreign direct investments. These relations are characterised by asymmetry. It is expected that establishing a free trade area between the two groupings should bring multiple benefi ts, but the scale of those benefi ts may be varied between the two partners. However, the constantly present differences in positions create problems for effective conclusion of negotiations of this agreement between the EU and Mercosur.

Key words: interregionalism, regionalism, Mercosur, EU, foreign direct investment, trade, association agreement

Introduction

Currently, the regionalisation process is becoming more and more intensive; this is refl ected in the establishment of regional integration

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agreements of varied scope and intensity of relations (Kot, Jedlińska 2013: 337). Integration activities are not limited only to trade cooperation;

their scope is increasing and includes cooperation related to investment, economy, intellectual property rights and many other types. At the same time, interregional cooperation, realised between integrational organisations, is also developing.

The EU is also joining the progressing integration processes of world economy and seeks to tighten its relations with current partners, as well as to institutionalise that cooperation. This includes e.g. the EU-Canada Comprehensive Economic and Trade Agreement (CETA) (Comprehensive economic…); The Transatlantic Trade and Investment Partnership between the EU and the USA which has been negotiated until currently becoming suspended. The countries of South America which form Mercosur also constitute an important direction for cooperation with the EU. The treaty which established Mercosur, that is the Southern Cone Common Market, was signed on 26^th March 1991. At fi rst, the organisation included Brazil, Argentina, Paraguay and Uruguay, becoming the most important integrational organisation in South America. Its purpose was to establish a common market with free fl ow of factors of production by the end of 1994 and to promote economic growth. A customs union was established on 1^st  January 1995 (Oziewicz, Żołądkiewicz 2001: 181–182, 187–190). After that, Venezuela joined as a new member.

The aim of this paper is to discuss trade and investment relations between the EU and Mercosur countries, as well as the institutional basis for realised economic cooperation and perspectives for its development. It is said that the free-trade agreement between the two organisations which is currently being negotiated should intensify mutual economic relations and at the same time strengthen the EU’s global position. However, there are still barriers related to liberalisation of economic relations between the two groupings.

The article uses the analysis of statistical data and literature.

Institutional basis of economic cooperation between the EU and Mercosur

Currently, mutually complementary and related economic globalisation and regionalisation processes are progressing with considerable intensity.

Regionalisation is associated with integration of countries and economies, the deepening of mutual relations on various levels, not only economic,

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but also political, social and cultural, while being the institutional factor of regional integration. Regionalism, on the other hand, pertains to a project or a concept for functioning of a region put forward by a country or several countries. Regionalisation has undergone transformation; three distinct waves of regionalisation are identifi ed. The current wave is a sign of the desire of various countries, often at different levels of development, to expand their activities, primarily export, and to strengthen their position.

New regionalism, as a new form of contemporary economic integration, is a strategy of countries of a particular region which utilises a mechanism of cooperation occurring on multiple levels, not only economic, in order to improve competitiveness of that region, but also to give the ability to cope with challenges related to globalisation. Complex economic relations are created between groupings on different levels of development, initiating the so-called interregionalism; relations between the EU and Mercosur are an example of that (Kot, Jelińska 2013: 336–339).

The EU actively promotes integration in countries of Latin America, wishing to strengthen its position in that region, and by extension in the world, through infl uencing the behaviour of other entities within the global structure of forces (García 2015: 622–623). Promoting these interregional relations enables the EU to realise its own goals related to external relations. These goals are: promoting values such as human rights, democracy, sustainable development and a vision of a multilateral world;

creating a clear regional identity; seeking to achieve its economic interests (García 2015: 623–625), and through that attaining power. The EU seeks to achieve its economic goals and exert considerable force, which manifests itself in the so-called imperial relations between organisations (García 2015: 624–626).

Economic relations between the EU and Mercosur have been regulated by an Interregional Framework Cooperation Agreement, which entered into force on 1^st July 1999 (European Commission 2017a) and covers multiple areas of mutual interest, including trade and economic matters. Its objective, as indicated therein, is to strengthen the existing relations and to prepare the conditions enabling the creation of an Interregional Association. As far as trade is concerned, it was emphasised that further relations will be oriented towards gradual liberalisation of trade. The main areas of cooperation include: market access, trade liberalisation, trade relations with non-member countries, improvement of compatibility of trade with WTO rules, identifi cation of sensitive and priority products and cooperation concerning exchange of information on services. Regarding agricultural and industrial

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products, the groupings agreed to cooperate to approximate their policies on quality and conformity recognition. Other areas of cooperation were also mentioned, including economic cooperation in the scope of individual sectors (Interregional Framework Cooperation…). The EU also entered into separate bilateral agreements with Mercosur countries: Argentina, Paraguay, Uruguay and Brazil. The fi rst country to sign such an agreement was Argentina; the agreement entered into force in 1991. The agreement focused on trade, economic, agricultural and industrial cooperation. The next bilateral trade agreement was concluded with Paraguay and entered into force in 1992; this was followed by Uruguay. Brazil was the last country to sign a similar agreement; it entered into force in 1995. Cooperation was to be strengthened in the following areas: trade, investments, fi nance and technology (Bilateral framework agreements…). The EU became an “active mentor” of Mercosur integration, assisting the organisation in activities for association, including fi nancial aid within the project, through supporting infrastructure essential to economic integration (García 2015: 624, 628).

Currently talks between the EU and Mercosur concerning the free trade area are underway. Mercosur is represented by Argentina, Brazil, Paraguay and Uruguay; Venezuela acts as an observer and is not a party to the negotiations. This agreement will not be a regular free-trade agreement, as it covers issues related not only to trade, but also deals with such matters as technical barriers to trade, sanitary and phytosanitary measures, services or government procurement. Negotiations also cover such areas as intellectual property and sustainable development (European Commission 2017a). This currently negotiated free-trade agreement is planned to constitute a part of the Association Agreement (European Commission 2017a)¹. Negotiations began in 1999 with the fi rst meeting of the EU-Mercosur Cooperation Council, which concerned the commencement of negotiations for the Interregional Association Agreement. During this meeting the parties agreed on the schedule of negotiations, as well as the methodology and structure. The established Bi-regional negotiation committee was to supervise the process regarding the pillars of the negotiations: cooperation and trade (Vaillant, Vaillant 2014: 339)². The agreement should also result in the intensifi cation of cooperation in multiple areas, including trade and investments, between the two organisations.

1 As of 1^st July 2017.

2 More on the negotiation process in: Vaillant, Vaillant 2014. The subject is also addressed in:

Doctor 2007.

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