RESTRICTED  WORLD TRADE  
ORGANIZATION  WT/COMTD/1/Add.16 
16 May 2006 
 (06-2392) 
Committee on Trade and Development 
  
 
 
 
EXAMINATION OF THE SOUTHERN COMMON MARKET (MERCOSUR) AGREEMENT 
 
Note on the Meeting of 3 April 2006  
 
Chairman:  Mr. O. Camara (Senegal) 
 
Addendum  
 
 
1. The meeting was convened in document WTO/AIR/2786/Rev.1. 
2. Under Agenda Item C.II of its 42nd Session, the Committee on Regional Trade Agreements 
(hereinafter CRTA or the Committee) took up the fourth round of examination of the Southern 
Common Market Agreement (MERCOSUR) betwee n Brazil, Argentina, Uruguay and Paraguay. 
3. The Chairman  noted that the proceedings of the firs t, second and third rounds of examination 
of MERCOSUR (hereinafter the Agreement) , which had taken place in October 1995, 
September 1996 and May 1997, had been dist ributed in documents WT/COMTD/1/Add.9, 
WT/COMTD/1/Add.10 and WT/COMTD/1/Add.12, r espectively.  Since then, the Parties had 
provided additional information, which had been circulated in documents WT/COMTD/1/Add.13 and 
14.  The general incidence calculation, which had been distributed on 24 May 2005 could be found in 
document WT/COMTD/1/Add.15.  In a ddition, the Parties had recently submitted to the Secretariat a 
general declaration addressed to delegations which he invited the Parties to present. 
4. The representative of Argentina , speaking on behalf of MERCOSUR, noted that the 
Committee reviewed MERCOSUR on three occasions – in 1995, 1996 and 1997.  He reminded the 
Committee of the mandate for the review of ME RCOSUR, particularly regarding the general 
incidence of custom duties which was provided for in Article XXIV:5(a) of the GATT.  The mandate 
for the review of MERCOSUR, contained in doc ument WT/COMTD/5/Rev.1 of 25 October 1995, 
was "To examine the Southern Common Market Agreement (MERCOSUR) in the light of the 
relevant provisions of the Enabling Clause and of the GATT 1994, including Article XXIV, and to 
transmit a report and recommendations to the Comm ittee on Trade and Development for submission 
to the General Council, with a copy of the re port transmitted as well to the Council for Trade in 
Goods.  The examination in the Working Party will be based on a complete notification and on 
written questions and answers".  The afore-menti oned document also include d the Understanding read 
out by the Chairman of the CTD at its meeti ng of 14 September 1995 which stated that "It is 
understood that the statement read out by the Chai rman of the Council for Trade in Goods under item 
7 of the Agenda of its meeting on 20 February 1995, as contained in document WT/REG3/1, applies 
mutatis mutandis to this Working Party".  In the d eclaration made by the Chairman of the Council for 
Trade in Goods (CTG) when it approved the manda te of the Working Party which reviewed the 
accession of Austria, Finland and Sweden to the Eu ropean Communities (EC), he said  that "it should 
be kept in mind that the purpose of an examination in the light of paragraph 5(a) of Article XXIV would not be to determine whethe r each individual duty or regulation existing or introduced on the 
occasion of the formation of a customs union is consistent with all provisions of the WTO Agreement;  WT/COMTD/1/Add.16 
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  it would be to ascertain whether on the whole the gene ral incidence of the duties and other regulations 
of commerce has increased or become more restri ctive.  Accordingly, although the Working Party 
would conduct its examination in light of the rele vant provisions of the Agreements contained in 
Annex 1A of the WTO Agreement, the conclusions  of the Report of the Working Party would be 
confined to reporting on consistency wi th the provisions of Article XXIV". 
5. The representative of Argentina recalled that dur ing the third meeting in which the Committee 
had reviewed MERCOSUR, it had concluded that the ex amination of factual issues had been finished.  
At that time, the Chairman of the CRTA had said  that he was satisfied with the progress made and 
only a few factual issues had to be clarified.  The Secretariat and the Parties would clarify these issues 
and would make available any relevant in formation to Members. Subsequently, on 
15 December 1997, the MERCOSUR Parties had submitte d the information requested which had been  
distributed in document WT/COMTD/1/Add.14.  The evaluation of the general incidence of customs 
duties applied prior to and after the establishmen t of MERCOSUR was the only pending topic.  This 
calculation had taken several years for technical re asons linked to the concordance between the duty 
types, the trade statistics and the different custom s duties nomenclatures.  The Secretariat had been 
finally able to provide the results which were  available in document WT/COMTD/1/Add.15, dated 
24 May 2005.  The calculation of general inciden ce carried out by the Secretariat evaluated the 
import-weighted average tariff rates, one reflecti ng the pre-customs union situation in 1994, and the 
other reflecting the post-customs union situation in 1995 and 2006.  Average applied tariff rates were 
then weighted by aggregated 1992-94 import values.  The Secretariat had concluded that the creation 
of the common external tariff (CET) did not represent  on average, an increase in the tariff rates faced 
by third countries.  The weighted average tariff rate  before the establishment of the customs union in 
1994 of 12.5 per cent was reduced to 12 per cent in 1995 after the establishment of the customs union 
and reached 10.4 per cent in 2006, which was the d eadline originally planned for its establishment.  
Although these figures demonstrated that MERCOSUR fulfilled the provisions of Article XXIV:5(a) regarding the general incidence of  customs duties before and after the establishment of the customs 
union, he stated that after the signature on 26 March 1991 of the Asunción Treaty through which 
MERCOSUR had been created, the Parties had begun to reduce their duties.  Thus, to fully reflect the 
impact of the creation of MERCOSUR, the starting poi nt for duties for the calculation of the general 
incidence of customs duties should have been 1990 or 1991, which were higher than those of 1994, weighted by trade data of 1988 to 1990.  However, as had been pointed out in the answer to question 
20 of document WT/COMTD/Add.4/Rev.1, this had not  been possible for technical reasons stemming 
from the different national nomenclatures.  Just to illustrate this, the average duties applied in 1990 
for each country of MERCOSUR according to the La tin American Integration Association (LAIA) 
were 18.34 per cent for Argentina, 20.73 per cen t for Brazil, 14.09 per cent for Paraguay, and 
23.40 per cent for Uruguay.  In his view, these fi gures demonstrated that the duty reduction in the 
MERCOSUR countries had begun before the entry into force of the CET in 1995.  Undoubtedly, the 
real impact of the creation of MERCOSUR in te rms of the reduction of duties applied as of the 
signature of the Asunción Treaty in 1991 was greater  than what was seen when comparing the duties 
applied in 1994 with the duties applied in 1995 or with the CET of 2006. 
6. In light of the time which had elapsed sin ce the last review in 1997, he provided the 
Committee with an update of the integration process of MERCOSUR, which was included in a 
document distributed in the room.  The documen t provided detailed data on inter-zone trade;  
extra-zone trade and the relationship with the third countries;  the calculation of the general incidence 
of the CET;  integration cooperation; and th e links between WTO regulations and those of 
MERCOSUR.  The document stated that the const itution of an integrated economic area between 
Argentina, Brazil, Paraguay and Uruguay was a cent ral, strategic project for the external policy of 
their countries.  Since halfway through the 1980's, the partners had worked on the construction of a 
unique regional identity which fostered their de velopment, and strengthened their international 
presence, contributing this way to the increase in exports, which was a central key factor for the 
sustainable growth of their economies.  The Asunción Treaty in 1991 was one of the most important WT/COMTD/1/Add.16 
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  milestones on this path, because it had given shape to  an ambitious project of vast economic, social 
and political implications, and had defined steps fo r the effective establishm ent of the joint common 
market.  He declared that the membership of  Argentina, Brazil, Paraguay and Uruguay to 
MERCOSUR was a strategic decision considering the geographic proximity, and the sharing of 
interests, history and culture and the common achiev ements in the integration process.  Economically 
speaking since the signing of the Asunción Treaty,  trade had increased sharply both amongst the 
member countries as well as with the rest of the worl d.  Also, the region had become consolidated as 
an end point for investment from third countries.  MERCOSUR also contributed to the increase of 
internal economic reforms and the degree of indu strial complementation and allowed small and 
medium sized enterprises to benefit from interna tional business.  Seen from a political angle, the 
benefits of MERCOSUR could not be doubted.  Its cont ribution to the consolidation of an atmosphere 
of peace and democracy in the region today was part  of the permanent, regional heritage which was 
not the case just two decades ago.  These assets were  important enough in themselves for the Parties 
to share the feeling that they needed to pursue MERCOSUR and take  it to an even higher qualitative 
level in terms of regional integr ation that would consequently e nhance development.  He also 
highlighted the commitment to democratic values  and the rule of law as exemplified by the 
Declaration on Democratic Commitments in MERCOSUR and the Protocol of Ushuaia on 
Democratic Commitment in MERCO SUR, Bolivia and Chile.  As far as the trade and economic 
effects of the integration process were concerne d, foreign trade for the four MERCOSUR countries 
including exports and imports had increased 80 per cen t over the last ten years (increasing from a total 
of 144 billion USD in 1995 to 260 billion USD in 2 005).  Considering the year prior to the Treaty of 
Asuncíon (1990), the leap in trade was in the order of 255 per cent.  Extra-regional trade for 
MERCOSUR stood at 220 billion USD in 2005 – a 90 per cent hike since 1995 and a 239 per cent 
increase vis-à-vis  1990.  Intra-zone results had also been  very positive, increasing from 8.12 billion 
USD in 1990 to 28 billion USD in 1995 and to 39 billion USD in 2005, representing an increase for the period of 381 per cent.  This trend had been furt her enhanced by removing tariffs in substantially 
all trade, and sustaining efforts to harmonize SPS a nd technical regulations among the Parties to the 
Agreement.  Between 1990 and 2005, the deve lopment and the dynamics of MERCOSUR had 
managed to attract to the region 315 billion USD of  Foreign Direct Investment (FDI), representing 
4 per cent of world FDI which was highly significant when compared to other areas such as the rest of 
Latin America and the Caribbean (including Mexico) which had attracted 6 per cent, or China which 
had attracted 7 per cent.  As for trade in ser vices, MERCOSUR was governed by the Montevideo 
Protocol on MERCOSUR Trade in Services that had entered into force on 7 December 2005.  This 
Protocol was similar to the GATS in several ways and it also provided for MFN treatment for MERCOSUR member states, disciplines on transparency, domestic regulation, recognition, and general and security related exceptions. 
7. The representative of Argentina also provided a review of MERCOSUR's external 
negotiations.  Through the Ouro Preto Protocol and the adoption of the CET in 1994, MERCOSUR 
had established the means to negotiate jointly with third parties.  In 1995, the Parties signed an 
inter-regional cooperation agreement with the European  Union followed by the signing of a free trade 
agreement (FTA) with Chile in 1996, and an FTA w ith Bolivia in 1997.  Keeping with this process, 
MERCOSUR had also signed FTAs with other count ries in the Latin American region such as 
Colombia, Ecuador, Peru and Venezuela.  The agreem ent to jointly negotiate was reaffirmed in the 
year 2000.  That same year, a framework agreemen t that led to negotiations to form an FTA with 
South Africa had been signed and had been later sp read to all members of the Southern African 
Customs Union (SACU).  In 2003, negotiations had started for a fixed preferences agreement with 
India which had been concluded in December 2004, thus becoming the first agreement MERCOSUR 
had signed with a non-American country.  This agre ement was currently before their parliaments for 
ratification.  Finally, in 2005, framework agreemen ts had been underwritten with Israel and the Gulf 
Cooperation Council (GCC) with a vi ew to launching negotiations for FTAs.  With Israel, the first 
round of negotiations had been finished in Febr uary 2006 whereas with the GCC negotiations were 
ongoing.  In addition, other agreements were under c onsideration.  In the short term, the Parties had WT/COMTD/1/Add.16 
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  already signed framework agreements with Egypt an d Morocco and they expected to sign yet another 
framework agreement with Pakistan.  Moreover, contacts were being made with Central American countries, Caribbean countries and the Republic of Ko rea.  This network of trade agreements would 
enable MERCOSUR to continue to increase the trade flows with various countries and regions all over the world.  He said that MERCOSUR was not lim ited to trade agreements or trade matters alone 
but also concerned social matters, security, cultur al, legal affairs, human rights, and others.  The 
political dimension of MERCOSUR had also incr eased with institutions such as the Forum for 
Political Agreement and Consultation with the pa rticipation of all Members of LAIA who had 
underwritten association agreements with MERCOSUR.  Bolivia and Chile had been the first and then 
Peru in 2003 followed in 2004 by Ecuador, Colombia and Venezuela. The latter had lately initiated an 
accession process to become  a full member of MERCOSUR.   
8. The social side of MERCOSUR had also been of key importance.  The work programme from 
2004-2006 had as its goals to bring about and enhance pa rticipation of civil society to foster the idea 
of MERCOSUR among Member States and enable greater mutual awareness among its societies by establishing standards linked to the building of a MERCOSUR citizenship.  Ot her initiatives in this 
sense had been the work carried out by the Consul tative Body for Civil Society of the Argentine 
Ministry for Foreign Affairs, and the initia tive meeting with MERCOSUR under the Brazilian 
President's Office.  At the latest presidency of MERCOSUR under Uruguay, the idea of "We are 
MERCOSUR – Somos MERCOSUR" had been launched with the main objective of drawing citizens 
into the whole process of regional integration.  Fr om an institutional point of view, there had been 
important developments in the past years like th e dispute settlement mechanism established by the 
Olivos Protocol in 2002.  By setting up a Sta nding Examination Tribunal the Parties had looked to 
advance towards a standard interpretation of the legal framework of MERCOSUR and the creation of 
common jurisprudence.  Another important featur e of the institutionalization of MERCOSUR was the 
Protocol of Constitution of the MERCOSUR Parlia ment which would take place in December 2006.  
He also highlighted the important role carried out  by the Commission of Permanent Representatives 
of MERCOSUR in consolidating the integration process by making proposals for specific action to 
further deepen the political, social and parliamentar y relationships within MERCOSUR.  From all this 
it was clear that MERCOSUR represented an ongoing pr ocess.  As such, the Parties were carrying out 
an analysis tied to the overall consistency of the CET with a view to fostering development without 
any undue expenses for regional industry.  In th is regard, they were currently assessing two key 
sectors for the competitiveness of their econom ies: capital goods;  and the informatics and 
telecommunications sector.  Also important were th e negotiations to conclude the Customs Code for 
MERCOSUR, that would eliminate double taxation with in the region, include interconnection of the 
customs computer system, and would also introduce a customs revenue distribution mechanism. 
9. As for issues tied to productive integration, MERCOSUR was bringing about balanced 
industrialization for all its partners.  In order to  do that, the governments were fostering meetings 
among the business communities of all four countries fo r them to define appropriate alternatives for 
regional production that would complement one anothe r and to pinpoint the sorts of changes in policy 
that were required for this process to move forwar d.  Along the same lines, they were also speeding 
up work and projects, so that all countries in the block would have enhanced infrastructure – for instance roadways, energy, harbours and a new thrust fo r ship building.  In order to tackle the regional 
differences in development within MERCOSU R the Fund for Structural Convergence in 
MERCOSUR (FOCEM) would be operational as of 2006.  It was the first community mechanism 
which would enable a net transfer of revenues from the largest MERCOSUR economies to the smaller 
ones.  The Fund would be geared to finance pr ogrammes aimed at the promotion of structural 
convergence, development of competitiveness and fost ering of social cohesion, particularly for the 
smaller economies and the less-developed regions.  Lastly, the Parties were also reviewing the 
Protocol for protection and fostering of inv estment within MERCOSUR, which would enable 
MERCOSUR corporations to rely on a stable legal framework for developing their business ventures.  
In conclusion, he said that with the calculation of  the general incidence before and after the customs WT/COMTD/1/Add.16 
Page 5 
 
 
  union, he concluded that MERCOSUR authorities felt that they had finished this prolonged 
examination process and that they had managed to prove and establish that the general impact of 
customs duties had been lowered thanks to setting up MERCOSUR. 
10. The Chairman  thanked the Parties for their presentation and invited the Members to provide 
any specific observations on document WT/COMTD/1 /Add.15 relating to the calculation of general 
incidence of the Agreement. 
11. The representative of the United States  thanked the Parties for a very comprehensive report 
and noted that this Agreement had been under exam ination in the Committee for a very long time.  
She announced that she would submit some questions  in writing on the national exemptions and on 
the treatment of extra-MERCOSUR imports once they entered MERCOSUR.  These were technical 
questions which should not prevent progress in the examination of the Agreement, which could be 
concluded. 
12. The representative of th e European Communities  thanked the Secretariat for the calculation of 
general incidence, which had yielded interesting re sults.  While his delegati on had noted that overall 
weighted average applied levels had decreased upon the formation of the customs union, it had also 
noted that three of the four partners of the customs union had increased their tariffs.  His delegation 
was still looking at the calculation done by the Secret ariat, in particular at the situation of tariff 
headings and subheadings and whethe r or not applied rates had increas ed in relation to bound rates.  
Thus, his delegation might still find it necessary to  submit further questions in writing.  The 
representative of Argentina  replied that the calculati on of general incidence re lated to the overall, not 
the individual, calculation of levels.  In addition, another calculation done by the Secretariat that could 
be provided to Members if requested, showed that taking into consideration each country 
independently and counting not only tariffs but also other surcharges and duties that were in place in 
1994, the incidence had been reduced between that  year and 1995 for some MERCOSUR members.  
Therefore, in addition to the overall calculation of general incidence, which was the key aspect, a 
more detailed study at the country level showed th at the requirement of general incidence had been 
fulfilled.  This should therefore conclude the outstanding issues of MERCOSUR's examination.  
Although Members had the right to pose questions, the Parties considered that once these questions 
had been answered, the examina tion should be concluded.   
13. The representative of Australia  sought information on the implementation progress, including 
the percentage of trade and tariff lines covered and whether the list of excluded products had been 
reduced.  The representative of Argentina  replied if the question related to the products excluded from 
intra-zone trade, the list had been greatly reduced to a minimum list of products.   
14. The Chairman  observed that the Committee seemed to have exhausted its factual inquiry and 
proposed that the Secretariat begin drafting the re port for this examination.  However, additional 
questions could be submitted to the Secretariat by 28 April, to which the Parties would have to 
respond by 19 May, date at which the examination would be formally concluded.  It was so agreed .   
15. The Committee took note  of the comments made. 
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