BACK
In theory, it is a wonderful idea. In practice, previous attempts by developing countries have been wrought with difficulties. The Latin American Free Trade Area (Mexico and all of South America), the Central American Common Market, Caribbean treaties, and an East African Community (of Kenya, Tanzania, and Uganda) all failed. Mercosur one of the few successful cases (so far) since these failures. Trade as expanded greatly, due in part to its liberalization programs.
Liberalization is a process in which a country lowers import duties, such as tariffs, so that it is cheaper for a country to export, and conversely import goods. The large Mercosur countries, Argentina and Brazil, have agreed to reduce import duties by 50% in 1997, 75% in 1998, and completely eliminate all duties by 1999. For Paraguay and Uruguay, they will reduce their duties similarly, but they are allowed a year longer. Yet, some products are exempt from these reductions. Each country is allowed a "list" of 300 products which they can temporarily exempt from tariff reductions.
Quotas, a non tariff trade impediment, are handled dissimilarly in Mercosur. Each country can unilaterally decide to raise quotas, or keep them at their original levels. Other non tariff barriers, classified by each country as anything financial, administrative, or related to currency exchange that impedes the flow of goods and services, were listed and eliminated by the countries in 1994.
As far as labor migration is concerned, Mercosur is currently assessing the viability of creating a single document for Mercosur citizens to be able to use for travel within Mercosur countries. Currently, a valid passport or state issued identification card is all that is needed for migration.
Several Mercosur countries have areas called "free trade zones," or "export processing zones." These areas are places where goods produced inside them have traditionally been exempt from trade barriers to other countries. With Mercosur, these areas are treated as if goods produced there were produced outside of the country. Products made in these free trade areas that are imported to Mercosur are subject to the Common External Tariff.
The Mercosur countries have agreed to coordinate their national macroeconomic policies to encourage equal competition between sectors. Policies on foriegn trade, agriculture, fiscal and monetary decisions, foriegn exchange and capital, services, customs, transport and communications must be agreed upon and shared equally between the countries.