Mercosur has become a bad joke. Continuous little crises belie the assurances of confidence and progress that are periodically uttered by the foreign ministries of Brazil, Argentina and their partners in grime. The latest source of tension, which has been termed "The Toy War," is one more example of the pathetic state of a process of regional economic integration in which much effort and resources has been invested, with little to show for it. So little in fact that closing the file would probably be of little real consequence for the countries involved: they would still have their little fights, their good days together, and regular meetings to discuss common problems. They would be freer to negotiate commercial agreements but, above all, they would stop having to patch up a cover for a process that, honestly, has never gone far institutionally, and that has made very little difference to dynamics of cooperation, integration and conflict that would have developed anyway.
Mercosur stands for Mercado Comun del Sur: the Common Market of the South. Made up of Argentina, Brazil, Paraguay and Uruguay, it is a common tariff zone, i.e. its member countries not only trade freely with one another, but also share external tariff barriers. As such it is more ambitious than a simple free trade zone like NAFTA, but less so than a full-fledged economic community, like the EU. It has been touted as the region's answer to ultra-liberal NAFTA, as a way for its members to build-up their export capacities behind some protection, and as a political springboard for its member countries, to gain influence in the world by acting collectively, particularly but not exclusively in trade negotiations, where the bloc stands as one.
Mercosur has a little secretariat, a Presidency that roves from one country to the next every six months, and even a Parliament, but every decision of import are taken by the Presidents of the countries. The president has no autonomy, the secretariat no capacity, and nobody cares about the Parliament or knows anything about who its members are or what they do. If you don't believe me, go check the website of any of the major journals of any of the four countries, seach for "Parlamento" and "Mercosur" --or "Mercosul" for Brazilian papers. If you find something, PLEASE do send it to me because my files are empty...
The history of commercial conflicts between Mercosur countries, particularly Argentina and Brazil, is long, lively, and pathetic. Fortunately for the student of trade issues in the region, the press in the region has long decided to treat those conflicts lightly. Among others, we have thus had the Cellulose War (between Argentina and Uruguay, still raging, by the way), the Chicken War, the Fridge War, the Shoe War, the Stove War and now, in step with the holiday season, the Toy War, all of them between Argentina and Brazil. The Toy War story is typical: the government of Argentina, to protect its toy industries, announced last week that it was imposing import license for Brazilian toys and would limit the quantities brought into the country. This week, Brazil announced that they would do the same to Argentinian toys. This is happening a few days after a meeting between President Lula and Argentina's President Cristina Kirchner, a meeting meant precisely to tackle the fast-growing list of little commercial skirmishes that is poisoning the relationship between the two countries.
The problem is much deeper than toys, or shoes, or fridges or even all this together. As The Economist was noting a few weeks back, Brazil is taking off, and Argentina remains stuck. The asymmetry between the two countries has been growing consistently since the mid-90s, with Brazil's relative weight in Mercosur, for trade, investment, GDP per capita, military power or almost any other metric, growing steadily. Argentina appears to be living on borrowed time, with a new economic crisis in the offing. Perhaps most damaging, Brazil's dependence on the bloc is also steadily diminishing. It is as if Germany were getting ever more powerful relative to all the other members of Europe, while becoming increasingly tied up politically, strategically and economically with China and the US. The exact opposite, by the way, is happening, with the European bonds getting stronger and the relative weight of its big players --Germany and France-- diminishing progressively, as new countries join in and as growth in smaller and more backward economies is typically stronger than in the larger ones.
To make things worse for Mercosur, a vote in the Brazilian senate is the last obstacle to Venezuela's joining the bloc as a full member. This would mean that the commercial policy of all of its members would suddenly become hostage to the whims of Hugo Chavez. A vote in time for Chrismas would make for great titles though: Santa Chavez gets involved in the Toy War.
No, really: Time to bury this one.