Integration at two speeds: MERCOSUR and NAFTA, a comparative approach through agencies and objectives

Alberto Manuel Poletti Adorno[1]

The last part of the XX Century marked the beginning of different way of relationships between countries in both South and North America. Governments began to take part more actively into regional integration process and MERCOSUR and NAFTA were born.

In 1991 President Fernando Color de Mello of Brazil, President Carlos Menem of Argentina, President Luis Lacalle Herrera of Uruguay and President Andres Rodriguez of Paraguay signed the Treaty of Asuncion[2] to create a customs union with a common external tariff by December of 1994 that is evolving into a common market.

The US President George Bush, the Mexican President Carlos Salinas and Canadian Prime Minister Brian Mulroney signed the NAFTA Treaty in 1992. It was ratified by the legislatures of the three countries in 1993 and entered force January 1, 1994.

In many sectors of the NAFTA Countries, there was a consensus that, because of the resistances[3], the treaty should only include free movement of goods and services, not of persons[4]. In MERCOSUR governments were mainly worried in economic opportunities in order to find a solution for the unemployment problems[5]. With the aim of stop the controversies of lack of sovereignty, both MERCOSUR and NAFTA countries decided to create intergovernmental organs rather than supra nationality. But both partnerships boarded with different approaches the same situations, as we are going to analyze further.

            The personality of international law

All the persons who work for NAFTA are national of the three states and they don’t occupy a position in the institution as servants of an international body but as civil workers of each country’s section of NAFTA who doesn’t have a headquarter or proper building. Excepting the national delegations of different Conseils, Groups and commitees for the periodical meetings that are held in different countries, people who work in MERCOSUR belong to an international organisation and are mainly considered as diplomatic in foreign countries. They have succeeded an international contest and the number of places are divided for all the countries.

This status is possible since article 34 of the Protocol of Ouro Preto grants legal personality of international law and is able to perform all acts necessary for the realization of its objectives (article 35) and is able to sign headquarters agreements (article 36). These are prerogatives of any international organization, and make possible for this organization to establish in a given country.

            The institutions of NAFTA and MERCOSUR

We should note that even if there are bodies with similar objectives, the architecture of both processes is quite dissimilar.

In NAFTA, the Free Trade Commission, composed of cabinet-level representatives from the three member countries[6], has different duties: supervision of the implementation and further elaboration of the Agreement, helping to resolve disputes arising from and overseing the work of the NAFTA Committees, Working Groups and other subsidiary bodies. There are also three senior trade department officials designated by each country (Coordinators), different commitees and working groups and the NAFTA Secretariat, comprising one Section in Ottawa, Washington DC and Mexico DF. Each national section is responsible for the administration of the dispute settlement provisions of the Agreement. We should also mention the aditional protocols: the North American Agreement on Environmental Cooperation (NAAEC)[7] and the North American Agreement on Labor Cooperation (NAALC)[8] that both have Council composed of the highest-level authorities in the field (cabinet level or equivalent) of the three countries.

We could arrange institutions of MERCOSUR in different ways: decisive and non decisive bodies; political, executive and administrative bodies; with democratic of technical representation. The main agencies of MERCOSUR that are the Common Market Council and the Common Market Group[9].

According to article 3 of the Protocol of Ouro Preto, the Council of the Common Market is the highest body of MERCOSUR, with responsibility for the political leadership of the integration process and for making the decisions necessary to ensure the achievement of the objectives defined by the Treaty of Asuncion and the final establishment of the common market. It is composed by the Ministers for Foreign Affairs and the Ministers of the Economy of the States Parties, or their equivalents. Each State states the Presidency of the Council for periods of six months. The order of the Presidency irotates among the States Parties, in alphabetical order. We should mention that the Presidents of the countries meet at least twice a year in a city designated by the country that is in charge of the pro tempore Presidency[10].

The Common Market Group is the executive organ of MERCOSUR. It is composed of four members and four alternates for each country, appointed by their respective governments, who must include representatives of the Ministries of Foreign Affairs, the Ministries of the Economy (or their equivalents) and the Central Banks. It holds ordinary or extraordinary meetings, as often as necessary, normally every three months.

Both Common Market Council and Group enact Decisions[11] and Resolutions[12] binding upon the States Parties.

Other important institutions are the MERCOSUR Trade Commission and by the MERCOSUR Administrative Secretariat and the Parliament located in Montevideo[13].

We can also mention the different meetings of Ministers, the Work groups, specialised meetings and technical reunions in order to analyze one particular aspect of the integration process. They are related to the Common market Council or Group and they met periodically in different countries or in the Administrative Secretary in Montevideo[14].

The Parliament of MERCOSUR is not a tradicional legislative branch. The initial functions were to help the acceleration of the internal procedures in each State member in order to reach a quick entry into force of MERCOSUR norms, help the harmonisation of legislations, analyze the subjects submited by the Council and give recommendations to the institutions of MERCOSUR.

According with the Protocol of Montevideo[15] of December 5th, 2005 it was composed by 18 members of each country elected by direct, universal and secret (article 6). They remain in the seat for four years, even if, during the transitory period the national members of each country for the MERCOSUR Parliament can still be choosen between members of each national Legislature and they could remain in their seats for a longer period, in order to make the elections the same day for all the members on 2014.

One important project is to distribute the seats according to the populations of the countries. Several negotiations are taking place in order to find a consensus and find an equitable solution for the representation of each country considering the differences of size in populations: Brazils has 188.3 millions of inhabitants, Argentina 39.7 millions, Paraguay 6.6 millions and Uruguay 3.3 millions.

We could also mention the different forums and commitees that have no decisive powers and were created in different periods.

The importance of these aspects can not be denied. As in every process that wants to go to the end, we need people who work entirely on it. And is this aspect that lead us to the different objectives and goals of both NAFTA and MERCOSUR, which are not similar.

            The objectives: something else than free trade or common market?

MERCOSUR objectifs are larger than NAFTA. If both at the beginning were focused on the free transit of goods and services, MERCOSUR included production factors. We may remember that Mexico government at the beginning of NAFTA didn’t want to discuss the commerce of oil[16] into the United States that was demanded by the United States in exchange of a migratory settlement[17].

The cross-border movement of persons and workers is not actually a part of NAFTA. MERCOSUR signed many international treaties in order to facilitate (not to allow entirely as in the European Union yet) the displacement of persons. We can mention that the four countries of MERCOSUR ratified the agreement for residency for the four States Parties of MERCOSUR, Bolivia and Chile signed in Brasilia on 2002. Citizens of MERCOSUR countries can travel with the national identity document to each other and do not require passport or Visa if they don’t entend to establish for more than three months there.

Canadian citizens do not require a visa to enter the United States directly from Canada for the purposes of visiting or studying, but they must hold passports and pass the migration controls[18]. US citizens are subject to the same rule. Both Canada and the United States requires Mexican citizens to apply for a visa in order to get access to their countries[19]. Mexico do not require citizens of Canada and the United States to apply for a visa in order to entry in its territorry[20]. There is a NAFTA Visa known as TN (Treaty National) Visa that was created after the signing of the North American Free Trade Agreement (NAFTA) in 1994 to facilitate the temporary movement of qualified professionals between Canada, Mexico, and the United States.

And we should mention that NAFTA countries are allowed to negotiate and sign Free trade agreements with other countries[21]. The MERCOSUR countries don’t have that right and are forced to negotiate as a entire group. It could happen that a third country wants to sign a treaty with only one of them: this country is not authorised to do so outside MERCOSUR and ALADI[22].

            An important achievement: a mechanism to solve disputes

As in every field of human society, there are problems related to international trade that must be solved quickly and peacefully. Here again, we find interesting difference between our two countries groups.

Under the NAFTA, there are four main dispute resolution processes, named after corresponding chapters of the agreement: Chapter 11 (Investment), Chapter 14 (Financial Services), Chapter 19 (Antidumping and Countervailing Duty final determinations) and Chapter 20 (general dispute settlement procedure). Each system have particularities and allow to create panels fo solve the disputes, with delays that facilitate a quick solution[23].

In MERCOSUR, the system for dispute settlement has been originally settled in the Treaty of Asunción (1991) and was modified in Ouro Preto (1994), Brasilia (2000) and Olivos (2002).

The Treaty of Asuncion provides that disputes between states must be addressed, first, through direct negotiations between the litigants, and subsequently, in successive stages, through action by the Common Market Group or the Common Market Council. Only the States can present cases.

If the countries didn’t reach an agreement, they could ask for an Ad Hoc Panel in order to decide the controverse. In the Protocol of Olivos was created a Permanent Court of Revision (PCR), so the parties may actually choose to fill the complain to the Ad Hoc Panel or to the Permanent Court in Asuncion. It is also possible to ask the Permanent Court to revise under determined circonstances the award of the Ad Hoc Panel.

            With faith in the future?

“For the United States, NAFTA was more about foreign policy than about the domestic economy. Its biggest payoff for the United States has been to institutionalize our southern neighbor’s turn away from centralized protectionism and toward decentralized, democratic capitalism”[24]. It was mentioned that the admission of Mexico in the Canada-United States free trade area was a test case in order to see the possibility of the extension with other countries of Latin America. But today, the association between the countries in North America is more than a free trade aerea[25] since there are other aspects (intellectual property, labor, environment) that are being object of special attention.

In the economic view, the exchanges between the countries had increased and even if all countries have suffered economic crisis, there is not a big voice asking for exit the NAFTA on them.

As to MERCOSUR, voices in the small countries (Paraguay and Uruguay) often requires more attention in order to end up with asymmetries or to end with protection. The President of Uruguay José Mujica when refering to new mechanisms created  in Brazil to protect the car industry and the raise of 30% on tarif trades for imported vehicules recently mentioned “If we are similar to any other country that is not in MERCOSUR, we must reconsider some things”[26]. Today MERCOSUR is not yet a full custom union or a common market.

Contrary to MERCOSUR, NAFTA dispute settlement process allow particulars to ask for an arbitral revision of the commercial claims. It is true that in MERCOSUR the governments can ask the Permanent court of revision to analyze a particular case. We often mention that the government can not pay attention everywhere. Why should one country monopolize the possibility of submiting a case? Is this process in conformity with the right to the access to a Court and open justice that is often mentioned by the governments?

We believe that there are less disapointed voices in NAFTA than in MERCOSUR and we consider that this is probably because of the possibility to ask for help is not entirely in the hands of national administrations but can be used by particulars.

In a moment when there are many doubts about the future of the integration process in MERCOSUR we believe that there must be a new possibility for dispute settlement that will allow not only citizen, but also countries, to adress their complains to an specialized Court that will have the power to improve the integration process.


[1] Docteur en Droit. Université Paris 1 Panthéon Sorbonne. Lawyer (Paraguayan Bar) and Profesor of Universidad Columbia del Paraguay. Faculty Research Program Award. International Center of Canadian Studies. 2011

[3] Paul KRUGMAN (1993), The Uncomfortable Truth about NAFTA: It’s Foreign Policy, Stupid, Foreign Affairs, Nov. 1993

[4] Björn HETTNE and Edmé DOMÍNGUEZ (1996), In European footsepts: NAFTA as a case or regionalism, in Weine KARLSSON and Axhil MALAWI (editors), Growth, trade and integration in Latin America, Institute of Latin American Studies, University of Stockholm, Sweeden, p. 175

[5] Paulo Roberto DE ALMEIDA (1996), Mercosur y Unión europea: de la cooperación a la asociación, in Georges COUFFIGNAL and Germán A. DE LA REZA, Los procesos de integración en América Latina, Institute of Latin American Studies,  University of Stockholm, Sweeden, p. 117

[6] See Annex I

[9] According to article 9 of the Protocol of Ouro Preto, functions of the Council and of the Group are limited, essentially, to administration and to serving as a negotiating forum for MERCOSUR. The Council has the duty “to conduct policy and to take decisions to ensure compliance with the objectives and time limits established for constituting the common market” (Article 10, Treaty of Asunción)

[10] The presidency of the organs in MERCOSUR is rotational.  Each country by turn, will preside for six months the Council and other organs, in accordance with the alphabetical order of the member countries.

[13] The meetings are held in different countries. There are some organs like the Administrative Secretary in Montevideo, the Permanent Court of Revision and the Social Institute in Asuncion and the Institute for Human rights public policies in Buenos Aires created by Decision 14/2009

[14] See Annex II for a complete panorama of the institutions of MERCOSUR

[16] Annex 201.1. The definition of territory includes the subsoil and natural resources of each country that are not part of the NAFTA

[17] Carlos SALINAS DE GORTARI, op. cit.

[21] Besides NAFTA, Canada has signed FTA with: Israel and Chile (1997), Costa Rica (2002), Colombia (2008), Peru, Jordan and the European Union (2009) and Panama (2010). There are negociations with other countries. We should also mention that Canada has signed a Trade and investment cooperation arrangements with MERCOSUR on June 16th, 1998. Source: http://www.international.gc.ca/trade-agreements-accords-commerciaux/agr-acc/index.aspx?view=d. The United States has free trade agreements in force with other 15 countries. These are: Australia, Bahrain, Chile, Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, Israel, Jordan, Morocco, Nicaragua, Oman, Peru, Singapore. President Obama signed free trade agreements with Colombia, Korea, and Panama on October 21, 2011, but the agreements have not been implemented. Mexico has also FTA with Costa Rica, Colombia, Venezuela and Bolivia (1995), Nicaragua (1998), Chile (1999), the European Union and Israel (2000), El Salvador, Guatemala and Honduras (2001), Uruguay (2004), Japan (2005). Available on Internet: http://www.aduanas.sat.gob.mx/pv_obj_cache/pv_obj_id_B9CBBB4434D2E702D0E15D787A87BF3146C40000/filename/GI07_06.pdf

[22] Uruguay and Mexico signed a FTA in 2003. Mexico is part of the ALADI and has signed previously with MERCOSUR countries an Agreement of economic complementation (ACE No 54/2002) in order to establish a FTA with them

[23] Annex 1901.2 § 3 NAFTA and Article 1094 § 14 NAFTA

[24] Daniel GRINSWOLD (2002), NAFTA at 10: An Economic and Foreign Policy Success, Free Trade Bulletin N° 1, http://www.cato.org/pub_display.php?pub_id=10687

[25] Susanne GRATIUS (2008), Mercosur y NAFTA. Instituciones y mecanismos de decisión en procesos de integración asimétricos, Editorial Vervuert, Spain. http://www.ojosdepapel.com/Index.aspx?article=2882

[26] Journal ABC Color, Asuncion, September 23rd 2011. http://www.abc.com.py/nota/el-uruguay-replantea-su-permanencia-en-mercosur.

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[1] Journal ABC Color, Asuncion, September 23rd 2011. http://www.abc.com.py/nota/el-uruguay-replantea-su-permanencia-en-mercosur

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