College of Business Administration

International Business and Trade

Group Activity

Trading Bloc Worksheet

Trading Bloc Level of Integration
The Southern
Common Market It is a free trade area whereas the tariffs between members are
(MERCOSUR) significantly reduced, and some are even eliminated
altogether. A market for 60,500 EU companies wherein EU
exports to Brazil alone supports already 855,000 jobs in the EU
and another 436,000 in Brazil. More exports mean more jobs.
Also, its associate members such as Bolivia, Chile, Colombia,
Ecuador, Guyana, Peru, and Suriname receive tariff reductions
when trading with the full members but do not enjoy full voting
rights or free access to their markets.

For example, under the EU-Mercosur Free Trade Agreement,

Mercosur will remove tariffs on 91% of the goods imported from
EU, including key exports such as vehicles (35%) and machinery.
In return, the EU will exempt duties on 95% of goods imported
from Mercosur, along with 83% of agricultural imports. The free
trade agreement between Mercosur and Israel shows that Israel
liberalized more than 90% of its tariff lines for imports from
Mercosur states (Argentina, Brazil, Paraguay, and Uruguay)
while Mercosur liberalized more than 955 of their tariff lines for
imports from Israel. The said agreement aims to eliminate
barriers to trade, facilitate the movement of goods, promote
conditions of fair competition in the free trade area, increase
opportunities and increase cooperation in areas of mutual
interest.

Member Countries Top 5 Imports Top 5 Exports

Members ● Machinery ● Mineral Products
● Appliances ● Vegetable
● Argentina
● Chemical products ● Coffee
● Brazil
● Paraguay ● Pharmaceutical ● Beverages
● Uruguay products ● Tobacco
● Venezuela(su ● Transport Equipment
spended
since 2016) Brief Background / Short History
MERCOSUR (Mercado Común del Sur), or the Southern Common
7 associated Market, is an economic and political bloc originally comprising
● Chile Argentina, Brazil, Paraguay, and Uruguay. Venezuela joined as a full
● Bolivia member in 2012, but it was suspended indefinitely in late 2016 for
(Protocol failing to comply with the bloc’s democratic principles. In addition to
● of Accession, the four founding members of Mercosur and Venezuela, there are five
2012) countries with associate member status. These countries are Bolivia,
● Colombia Chile, Colombia, Ecuador, Guyana, Peru, and Surinam. As associate
● Ecuador members, they can join free-trade agreements but do not receive the
● Guyana benefits of the customs union. MERCOSUR was established under the
Treaty of Asuncion in March 1991 a period when longtime rivals
● Peru
Argentina and Brazil were seeking to improve relations; it was then
● Suriname
expanded under the 1994 Treaty of Ouro Preto, which allows it to
2 observers negotiate agreements with countries and other international
organizations. The main objective of Mercosur is the harmonization of
● New Zealand
 ● Mexico the economic policies of its members and the promotion of economic
development. To bring about the free movement of goods, capital,
services, and people among its member states. In 1995 a free-trade
zone and a customs union were formally established. Nevertheless, full
harmonization eluded Mercosur: some internal goods were still subject
to customs duties, and, though members agreed to apply a common
tariff on imports from nonmembers, disparities in such duties continued
to exist. The institutions of Mercosur include the Common Market
Council, the organization’s primary decision-making organ; the
Common Market Group, an executive body that implements policies;
the Trade Commission, which oversees commercial policy and may
resolve trade disputes; and the Consultative Economic and Social
Forum, through which businesses and trade unions may express their
views.

Reasons of forming the trading bloc

1. Mercosur's primary goal is to promote economic and social growth by
integrating the national economies of its partner countries for international
trade and investment opportunities

2. Aspires to promote the free flow of products, services, capital, and people
among its member countries

3. To create a number of agreements with third-party countries, offering them

trade favors and advantageous investment prospects with trading bloc
members. This agreement formed a customs union with a uniform external tariff
for non-partner nations, a common trade policy, and abolished customs
charges and fees among its members.

Trade Agreements
1. Preferential Trade Agreement with India.
On January 25, 2004, the Preferential Trade Agreement (PTA) was signed in
New Delhi. With the end goal of establishing a free trade zone between the
parties, the purpose of this preferential trade agreement is to deepen and
improve the already-existing relationships between MERCOSUR and India and
to encourage the growth of commerce by offering reciprocal fixed tariff
concessions.
2.EU-Mercusor Free Trade Agreement
On June 28, 2019, the European Union and the Mercosur nations of Argentina,
Brazil, Paraguay, and Uruguay secured a political agreement for a
comprehensive, ambitious, and balanced trade pact. The agreement
represents a win-win for both the EU and Mercosur, creating opportunities for
growth, jobs and sustainable development on both sides.
3. Israel-Mercosur Free Trade Agreement.
An agreement establishing a free trade zone was reached by Israel and
MERCOSUR Member States in December 2007 following nearly two years of
discussions.Through the concession of tariff preferences for a universe of
around 8,000 products, mostly manufactured commodities, the agreement will
aid in boosting bilateral trade with Israel over a ten-year period.