The creation of Mercosur was a major departure from traditional economic integration in South America. Implemented in parallel to unilateral trade liberalization and an overhaul of national development models, Mercosur initially focused on rapid liberalisation of tariffs on intra-regional trade. Until 1998 intra-regional trade flows expanded very rapidly in the context of rapid total import growth, suggesting strong trade creating effects.

As the "easy phase" of tariff removal came to an end, member states faced a more complex agenda encompassing treatment of NTBs, the administration of structural and policy asymmetries, the enforcement of common trade policies and "deepening" to include issues such as services and government procurement. Progress in this second stage were far less remarkable, specially in terms of the development of an effective regulatory framework. This has not prevented Mercosur from engaging in free trade negotiations with other members of the Latin American Integration Association, like Bolivia and Chile, the European Union and the hemispheric countries (in the context of the FTAA process). Moreover, after 1998 trade flows and interdependence reached a plateau as the macroeconomic environment worsened throughout the region. As trade conflicts multiplied, divergent policy and strategic preferences started to turn explicit, challenging cohesion and common subregional targets.

Presently, Mercosur is a shallow free-trade area covering the vast majority of traded goods.  The administration of structural and policy asymmetries as well as the "deepening" agenda are still on hold. Following piecemeal implementation, as of 2001 common trade policies are being thoroughly reviewed.

This study will be organised in four major sections namely:

   Section 1:  The current state of economic integration in Mercosur
   Section 2:  "Mirror image" with EU integration: horizontal and sectoral policies compared
   Section 3:  An assessment of costs and benefits of increased Mercosur-UE integration
   Section 4:  Prospects and proposals for future cooperation between the EU and Mercosur.

It will start in March 2002 and will last one year. It will be conducted by:

      Ramon Torrent, director of the Observatory of Globalisation

      Roberto Bouzas, co-director of the Observatory of Mercosur (within
           the Observatory of Globalisation)

     Pedro da Motta Veiga, co-director of the Observatory of Mercosur 
         (within the Observatory of Globalisation)