Mercosur: Evolution and Implications for U.S. Trade Policy [Updated January 5, 2007]   [open pdf - 130KB]

"Mercosur is the Common Market of the South established by Brazil, Argentina, Uruguay, and Paraguay in 1991 to improve political and economic cooperation in the region following a lengthy period of military rule and mutual distrust. On July 2, 2006, Venezuela acceded to the pact as its first new full member, making Mercosur the undisputed economic counterweight to U.S. trade policy in the region, but raising questions about how it may shift regional political and trade dynamics. Collectively, the Mercosur countries have a diversified trade relationship with the world. The United States is the largest trade partner, the European Union (EU) a close second, with each claiming about 25% of total Mercosur trade. By contrast, the four Mercosur countries together account for only 2% of total U.S. trade. Including U.S. imports of Venezuelan oil, the 'Mercosur 5' constitute 3.5% of total U.S. trade. […] It appears Mercosur has opted for political accommodation over deep economic integration. Mercosur, especially with Venezuela, will likely continue to resist movement toward a Free Trade Area of the Americas (FTAA), with Brazil in particular viewing the World Trade Organization (WTO) as the preferred alternative for achieving its trade policy goals. Given this impasse, it seems that the United States and Mercosur may continue to expand their influence through smaller trade agreements, presenting the possibility of two very different overlapping trading systems emerging in the Western Hemisphere centered around the U.S. and Brazilian economies. Few, if any, view this as an economically and administratively optimal alternative, presenting a formidable challenge to the future direction of U.S. trade policy in Latin America."

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CRS Report for Congress, RL33620
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