Egypt and the Southern Common Market (Mercosur)

Reviewed by: Wafaa El-houseiny

Translated by: Aya Barakat

Egypt and the Southern Common Market (Mercosur)

Mercosur is an economic bloc in Latin America that aims to achieve economic integration among member states.

The historical roots of the emergence of the “Mercosur” go back to the integration and cooperation program between Argentina and Brazil, which in turn goes back to the political desire of the leaders of both countries in 1986 AD, It was the driving force and first nucleus for the formation of the Mercosur group, and on March 26, 1991, Mercosur was established by Brazil, Argentina, Uruguay, and Paraguay, according to the Treaty of Asuncion, which entered into force in 1994, after the member states signed the “Ouro Preto” Protocol, which Establishing the financial institutional structure as an actual beginning for the grouping, on the path to achieving the main goal of the grouping, which is reaching the common market.

In 1996, Chile and Bolivia joined as partners.

In 1998, the Ushuaia Protocol 01 was signed, through which coordination and cooperation were transferred from the economic field to the political one, and emphasis was placed on supporting the democratic transition of MERCOSUR's States parties as well as associated States.

In 2002, the Olivos Protocol was signed: the settlement of disputes and conflicts in the MERCOSUR region was recognized, in accordance with peaceful and cooperative mechanisms guaranteed by the organs and bodies of this regional grouping.

In 2003, Chile and Bolivia joined the group, then Peru joined, followed by Ecuador, Colombia, and Venezuela in December 2004, and the 2004 Protocol was signed, which stipulated the establishment of a financing fund for the Mercosur Common Market with the aim of achieving structural convergence between all party states.

In 2005 AD, the member states signed a law stipulating the establishment of a founding parliament for the common market, with the aim of opening the way for elites and those elected by civil society.

In July 2006, Venezuela officially allied with Brazil, Argentina, Paraguay, and Uruguay as part of the Mercosur bloc, but the founding countries of the South American Common Market canceled Caracas' membership in December 2016, on charges of violating the group's democratic principles.

The Montevideo Protocol (Ushuaia 02) was also signed: to affirm the commitment to democracy in the countries and the Common Market for the South region.

Mercosur's organizational structure consists of several bodies:

The MERCOSUR Council: The highest presidential level of the bloc, consisting of the Ministers for Foreign Affairs and the Economy of the Member States. Member States rotate the presidency of the Council every six months in alphabetical order.

MERCOSUR: The executive branch of MERCOSUR, which monitors the implementation of the provisions of the Treaty of Asunción, takes operational action to liberalize trade and coordinate economic policies, and consists of the membership of the Ministers for Foreign Affairs and the Economy and the Governor of the Central Bank.

General Secretariat: It is responsible for issuing official statements about the group, as well as communicating with the Joint Market Group in making and implementing decisions.

Economic and Social Forum: It has an advisory role and represents various economic and social sectors of member states.

Sub-working groups: There are several working groups concerned, which carefully follow up and implement the assembly’s decisions, as well as prepare studies; There are working groups on trade issues, customs, technical standards, monetary and tax policies, transportation and land, industrial, agricultural and energy policies, economic coordination, and employment, unemployment, and security.

Joint Parliamentary Committee: The role of the committee combines an advisory nature with a mandatory nature with regard to decision-making.

Trade Committee: It provides advice to the Common Market Council regarding trade matters, develops the mechanisms required for the common trade policy, works to unify customs, and follows up on new developments in issues and matters related to the trade policies of member states among themselves or with countries outside Mercosur.

Permanent Court to Review Mercosur Policies: Its headquarters are in Asunción, the capital of Paraguay.

Administrative Court for Employment Affairs of Mercosur Countries.

Consultative Forum for the federal states, localities, provinces and various departments of the MERCOSUR countries.

The languages ​​used within the group are Portuguese and Spanish.

The Mercosur group aims to achieve some kind of economic integration among its members by promoting free trade and facilitating the movement of people and goods, as a result, it has concluded multiple agreements with countries or groups of countries, participates in activities and meetings of the bloc, has trade preferences with States Parties, and has signed trade, political or cooperation agreements with a diverse number of countries and organizations on all five continents.

Egypt and Mercosur

The relationship between Egypt and Mercosur dates back to 2010 when Egypt signed a preferential free trade agreement with the Southern Common Market (Mercosur), It was preceded by several negotiations conducted since the trade ministers of the Mercosur countries and the Egyptian Minister of Trade and Industry agreed, during his visit to Brazil from August 9 to 14, 2006; To activate the framework trade agreement signed between Mercosur and Egypt in Argentina, on July 7, 2004.

The ministers also agreed to begin forming committees to negotiate between the two parties to conclude a free trade agreement, after which the first round of negotiations was held in Egypt on October 16, 2008. This was followed by holding four negotiating rounds, the last of which was held in Argentina, during the period from the twelfth to the fifteenth of July 2010. During the five rounds that were held between Egypt and the Mercosur countries, the two sides reached a final form of the agreement and it entered into force after the Argentine Parliament signed it, then the customs exemption has been implemented since September 2017.

This framework agreement emphasized the following:

1-Establishing clear and permanent future rules to enhance the development of trade and mutual investments between Egypt and the four founding MERCOSUR countries: Argentina, Brazil, Paraguay, and Uruguay.

2- Commitment to strengthening international trade systems in accordance with the rules of the World Trade Organization.

3- Recognizing that free trade agreements contribute to expanding global trade, maximizing global stability, and, in particular, developing closer relations between people.

4-Bearing in mind that the process of economic integration includes not only gradual and mutual liberalization of trade but also the establishment of more comprehensive economic cooperation.

The agreement includes a number of levels of customs reductions on Egyptian exports to the countries of Mercosur:

The first level of reduction includes 2,500 Egyptian goods, and all customs duties on them have been removed since the first day the agreement entered into force on September 1, 2017.

The second level includes white cement and other cement items - paraffin wax - and razor blades. Products in this level have a 75% customs reduction, and it is expected that all customs duties on these goods will be removed on September 1, 2020.

The third level: goods at this level is subject to a 12.5% reduction over 8 years.

Level Four: Commodities are subject to an annual reduction of 10% over ten years.

The importance of signing a preferential free trade agreement with Mercosur is due to;

1- The agreement includes a number of promising areas of cooperation between Egypt and the countries of the group in various goods and services; including trade in meat, dairy, sugar, fodder, paper, and wood. It opens the way for the establishment of joint projects in the food and juice manufacturing sectors, in addition to cooperation in the fields of manufacturing cars, electrical appliances, and engines.

2-It is working to reduce customs tariffs by more than 90% between Egypt and the MERCOSUR countries, as well as liberating agricultural goods from customs, with solutions for rules of origin, preferential guarantees, and cooperation in the fields of investment, services, and others.

3- It opens new and promising markets for Egyptian exports, and at the same time provides a better competitive position for these exports, especially in the markets of Argentina and Brazil, which are considered the most important emerging economic powers in the world.

4- It reduces the cost of Egyptian imports coming from Latin American countries, such as sugar, meat, and soy oil.

5- Securing and ensuring that Egypt obtains its long-term food needs at better prices and increasing the confidence of Latin American investors in Egypt, then increasing investments in joint projects.

6- It embodies the idea of ​​deepening economic cooperation between the countries of the South on the one hand and on the other hand opening up between the continents of Africa and Latin America. Egypt is linked to a free trade agreement with most African countries that are members of the COMESA, as well as with Arab countries.

Under the agreement, the Egyptian government looks forward to increasing cooperation with MERCOSUR in various other economic sectors such as industry, technology, and tourism, especially since the MERCOSUR group is the fourth largest economic power in the world, and represents a large market for consumption and production as well.