ASEAN - MERCOSUR:

The potential of economic cooperation

March 16, 2017

Ignacio Bartesaghi, PhD

Contents of presentation

• Introduction to Mercosur process.

• Mercosur – ASEAN: dimension of the regional blocs.

• Potential in the relationship.

• Significance of integration models.

• 1985 – Foz do Iguaçu Declaration

• 1986 – Argentina-Brazil Integration & Economic Cooperation Programme (“PICAB”).

Uruguay was already part of the Trade Expansion Protocol (Brazil) and CAUCE (Argentina)

Background

Legal framework

• Asuncion Treaty (1991).

• Ouro Preto Protocol (1994).

• Ushuaia Protocol (1998).

• Olivos Protocol (2002).

• Constitutive Protocol of the Mercosur Parliament (2006).

Asuncion Treaty

• The origin of Mercosur.

• Definition of the bloc’s objectives.

• Definition of Trade Liberalization Programmefor the transition period (Annexes).

• Definition of transitional bodies.

Ouro Preto Protocol (1994)

• Conveys legal entity status to Mercosur.

• Defines institutional structure.

• Adoption of instruments from the typical tradepolicy of Customs unions.

Ushuaia Protocol

• Relates to democratic commitment within MERCOSUR.

• Consists of two protocols: Ushuaia I, and Ushuaia II.

• Includes participation of Chile and Bolivia.

Olivos Protocol

• Substitutes the Brasilia Protocol.

• Defines the Mercosur Controversy SettlementSystem.

• Creates the Permanent Review Tribunal(“TPR”).

Process

26/3/1991 Asuncion

Treaty

DEC 1994

Ouro Preto Protocol

1999 – Start of

negotiations with EU

Devaluation of Real.

2002 –

Olivos Protocol

Argentina –Uruguay

Crisis

2006 Constitutive Protocol of

ParlaSur

2010 –Negotiations are resumed with the EU

2012 –Paraguay is suspended Inclusion

of Venezuela

2016 –Venezuela

is suspended

FTZ CU

Agreements were subscribed with Chile, Bolivia, Peru, Colombia, Venezuela, Ecuador.

Agreements were subscribed with Cuba, India, Israel, SACU, Egypt and Palestine.

Transition

Consolidation

FOCEM

Objectives

Constitution of a Common Market:

Free circulation of goods, services and factors of

production.

Common external tariff and common commercial

policy.

Coordination of sectorial and macro-economic

policies.

Harmonized legislations.

Decision making

• 3 bodies with decision-making powers:

Common Market Council.

Common Market Group.

Mercosur Trade Commission.

• Consensus with the presence of all members.

Decisions within Mercosur

64%10%

11%

15%

Institucional y política

FOCEM

Económica y comercial

Agenda externa

0

5

10

15

20

25

FOCEM Institucional Política y social Económica y comercial

Agenda externa

2013 2014 2015

Mercosur politicization process in the last years. Now

we are in a new context.

Source: personal compilation based on data from Mercosur Secretariat.

• Trade Agenda: current trade agenda and recently-approved decisions.

• Political Agenda: adhesion of new members.Implications and challenges (Venezuela and Boliviaor in the future Ecuador).

• Production Agenda: actions carried forward in theframework of productive integration.

Mercosur Agenda: general aspects (I)

Mercosur Agenda: general aspects (II)

• Social Agenda: inclusion of social dimension.Institutional and regulatory advances in line with thesocial agenda.

• Institutional Aspects: institutional advances inMercosur’s new agenda. Creation of permanentinstances.

• New actors: civil society, sub-national actors, politicalparties.

Trade Agenda

• Measures aimed at defining and perfecting theCustoms union.

• 1994: approval of common external tariff (Dec. 22/94).

• At present, there are exceptions to Customs union andto the free trade area.

• 2015: intention to define a consolidation programmefor the Customs union (Dec. 56/10).

• Ouro Preto Protocol conveys legal entity status

for negotiating agreements with extra-zone

countries or groups of countries.

• Decision N° 32/00 – Reasserts commitment of

joint negotiations for trade agreements.

• There are exceptions: Uruguay – Mexico FTA,

Uruguay-U.S.A. TIFA.

External Agenda

• Agreements within the LAIA framework.

• Agreements with extra-regional countries: India (2004), Israel(2007), South African Customs Union– SACU (2009), Egypt(2010), Palestine (2011).

• Framework agreements: South Africa, Marrakech, Pakistan,Jordan, Turkey, Syria, Gulf Cooperation Council (GCC), Korea(MoU), Russia (MoU), Singapore (MoU), Tunisia, Lebanon(MoU).

• Agreements under negotiations: European Union and theexpansion of Mercosur – India agreement.

Agreements negotiated by Mercosur

Chile and Bolivia

CAN and Peru

Cuba

India

Israel

SACU

Egypt

Palestine

No agreements in place with developed world powers like the U.S.A.,

the EU, or Asian powers.

Trade Agreements

We are starting new negotiations with EFTA.

Uruguay, Paraguay and Argentina are observers of the Pacific Alliance.

Conclusions

• Original objectives were not attained.

• There are strengths in the political and socialareas, but weaknesses in the economic andtrade areas.

• New context and some uncertainties aboutthe future.

MERCOSUR – ASEAN (Year 2015)

Source: DNII based on World Bank, International Monetary Fund and Trade Map.

Population (million inhabitants) 922.936

GIP (millions of USD at current prices) 5.115.695

Share of world's GIP 7%

Average per capita GIP (USD at current

prices) - Year 19953.131

Average per capita GIP (USD at current

prices) - Year 201510.582

Total ASEAN + MERCOSUR exports (millions

of USD)1.491.962

Total ASEAN + MERCOSUR imports (millions

of USD)1.403.013

Share of exports in of world's overall trade 9%

Share of imports in of world's overall trade 9%

Populational evolution in ASEAN and MERCOSUR

Source: DNII based on World Bank.

ASEAN – MERCOSUR Trade(Thousands of USD, informed by ASEAN members)

Source: DNII based on Trade Map.

Source: DNII based on Trade Map.

ASEAN – MERCOSUR Trade

Yearly variation

2001 - 2015

ASEAN imp. from Mercosur 17%

ASEAN exp. to Mercosur 14%

World ASEAN imp. 9%

World ASEAN exp. 8%

MERCOSUR’s share in the ASEAN

0,0%

0,2%

0,4%

0,6%

0,8%

1,0%

1,2%

1,4%

1,6%

1,8%

2,0%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Part. Mercosur en Impo totales ASEAN

Part. Mercosur en Expo totales ASEAN

Source: DNII based on Trade Map.

MERCOSUR participation in total imports from ASEAN

MERCOSUR participation in total exports from ASEAN

ASEAN’s share in the MERCOSUR

Source: DNII based on Trade Map.

0,0%

1,0%

2,0%

3,0%

4,0%

5,0%

6,0%

7,0%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Part. ASEAN en expo totales del Mercosur

Part. ASEAN en impo totales del MercosurASEAN participation in total imports from MERCOSUR

ASEAN participation in total exports from MERCOSUR

Source: DNII, based on data from Doing Business and World Economic Forum.

Business context

Country

Position in the 2016 Global

Competitiveness Index (World

Economic Forum)

Position in Doing Business

2016 (World Bank)Average Integration process

Singapore 2 2 2 ASEAN

Malaysia 18 23 21 ASEAN

Thailand 32 46 39 ASEAN

Chile 35 57 46 Pacific Alliance

Mexico 57 47 52 Pacific Alliance

Colombia 61 53 57 Pacific Alliance

Peru 69 54 62 Pacific Alliance

Indonesia 37 91 64 ASEAN

Vietnam 56 82 69 ASEAN

The Philippines 47 99 73 ASEAN

Uruguay 73 90 82 MERCOSUR

Brazil 75 123 99 MERCOSUR

Cambodia 90 131 111 ASEAN

Laos 83 139 111 ASEAN

Argentina 106 116 111 MERCOSUR

Paraguay 118 106 112 MERCOSUR

Bolivia 117 149 133 MERCOSUR

Myanmar 131 170 151 ASEAN

Venezuela 131 187 159 MERCOSUR

Brunei* - 72 - ASEAN

*No data is available for Brunei regarding the Global Competitiveness Index for 2016

Main products traded

Source: DNII, based on Trade Map.

Chapter Description

23 Trash, food industry waste, animal food.

10 Cereals.

27 Mineral fuels, mineral oils and products from their distillation.

12 Oleaginous seeds and fruits, various seeds and fruits.

26 Minerals, slag and ash.

Main products imported by ASEAN from MERCOSUR

Chapter Description

85 Machinery, and electrical devices and materials, and their parts; recording devices.

84 Machinery, nuclear reactors, boilers, mechanical devices and artifacts.

87 Automotives, tractors, cycles, other ground vehicles, and their parts.

40 Rubber and rubber manufactured products.

64 Shoes, puttees, boots and similar items, and their parts.

Main products exported by ASEAN to MERCOSUR

Integration models

Source: De María, N. Pereira, M. (2016). “Estrategias de inserción internacional del MERCOSUR y la ASEAN”.

Bilateral agreements subscribed by ASEAN members

Source: DNII, based on WTO.

Country RTA notified to the WTO,

currently in place

Brunei 2

Cambodia 0

The Philippines 1

Indonesia 1

Laos 1

Malaysia 5

Myanmar 0

Singapore 15

Thailand 4

Vietnam 3

Potentials

• Diversification of trade opportunities:

– Exports of added-value food to the ASEAN.

– La ASEAN as supplier of low, medium, and high technologyindustrial goods.

– Opportunities in productive complementation for someindustrial sectors.

– Participation in global value chains.

• Services.

• Investments (infrastructure).

• Exchange of best practices.

ASEAN - MERCOSUR:

The potential of economic cooperation

March 16, 2017

Ignacio Bartesaghi, PhD