The European Union and Mercosur

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Table of Contents

Regional integration phenomenon
Thesis Statement
Integration in Europe
Integration in South America
Comparison Between Mercosur and the EU
Security and Defense
Conclusion
References

Regional integration phenomenon

Regional integration is a common trend in today’s world as countries, regions and businesses are on a drive to become a part of the globalization process. Within the previous decade, the ongoing processes that have taken place in organizations such as the European Union (EU) and the Southern Common Market (Mercosur) generated researchers’ interest in the phenomenon of regionalism and gave rise to debates concerning the main preconditions and effects of the proliferation of the regional arrangements.

The purpose of this paper is to compare and contrast the integration processes and institutional organization of the EU and Mercosur and to analyze their current bilateral relationships.

The most influential approaches to explain the phenomenon of regionalism are neo-functionalism and liberal intergovernmentalism. The exponents of neo-functionalism posit that the primary motivation of the member states for organizing the international institutions is satisfying their functional needs by standardizing the procedures of economical exchange (Mansfield 1997, 15).

The exponents of the liberal intergovernmentalism theories put emphasis on pressures of the internal interests of the member states and their impact on the processes in the international unity, considering the member states as the main actors in the international system (Mansfield 1997, 15).

On the economic side, there are also three significant approaches that categorize unions; namely, the custom union theory, the optimal currency theory and the fiscal federalism theory. The first is the customs union theory. This theory presumes that trade within regional blocs boost cooperation and the economic welfare of countries.

This is due to healthy competition and trade tariffs implemented. Skeptics claim that this type of cooperation results in some countries being disadvantaged due to their inability to fairly compete with products from member countries (Morgante 2003, 58). It will be seen in the case study in this paper that Mercosur is currently a customs’ union and therefore, smaller member states like Paraguay and Uruguay suffer the consequence of having open markets but not having a significant diversity of products; however, this tendency is changing as these two states are rapidly advancing.

The Optimal Currency Area theory is based on the geographical positioning of various states and the suitability of having a similar currency for the region. Sharing a single currency maximizes economic efficiency and results in the growth of a region based on the singular currency (Roett 1999, 99).

Finally, the fiscal federalism theory proposes that for any organization it is important to understand the kind of functions that need to be centralized and those that need to be decentralized. This theory is applied to economic integration in the sense that aspects that need to be decentralized by individual states could be done in a regional scale; such as the formation of a common currency and fiscal policy for a region (Piattoni 2003, 48).

Thesis Statement

This study will provide an explanation of the similarities and differences between the European Union (EU) and the South American Common Market (Mercosur).

The strategies used by both blocs in their international arrangements and integration processes are rooted in the historical background of the regions, peculiarities of their economical development and primary motivation of the states for creating a union. Mercosur is currently utilizing particular achievements of the EU as a model for its own integration process, as it is adapting them to the realities and peculiar needs of the bloc.

Integration in Europe

Lessons Learned from the Wars and the Need for a Common Market

Though the creation of the European Union is dated to 1992 when the Treaty of Maastricht was signed, the idea of uniting the efforts of European states for reaching common goals is much older. The two world wars forced nations to re-evaluate the concepts of territorial sovereignty and economic independence. The war crisis brought a need for improved cooperation and coexistence between nations (Lorenzo and Aboal 2006, 157).

The European Coal and Steel Community can be regarded as the first attempt of European integration. It was established by the 1951 Treaty of Paris which was signed by France, West Germany, Belgium, Luxemburg, and the Netherlands. In 1957 the integration process continued with the introduction of the European Economic Community (EEC) which became part of the future EU.

Thus, European integration has a rich historical background which influenced the organization and the level of institutionalization of the union. As mentioned by Kelstrup (1992) “the mid-1980s move towards a single market was facilitated by the European fear of loss of competitiveness compared with the USA and Japan” (Archer 2008, 26).

Approaches Taken

In order to explain the phenomenon of European integration on the government and community levels, researchers theorized the intergovernmentalist and neofunctionalist approaches. The debates concerning the role of the governments of individual European states and the Community institutions in the process of integration have been led for a long time.

The choice of appropriate patterns of cooperation and the institutional structure of the union are important for considering the interests of every member and creating the conditions for mutually beneficial long-term relationships.

All the member states of the EU are developed countries, and the confederation model was chosen as the best option for this international arrangement. The equal opportunities and the proportionate distribution of the profits is significant for ensuring the confidence of the states that their interests are not violated and that membership is advantageous for them.

At present, the European Union has 27 member states. The signature of the Treaty of Maastricht in 1992 indicated the beginning of a new period of integration in Europe. The EU has managed to promote free trade and movement of people within the territory of the member states through the abolition of national borders and the implementation of common policies on various issues among member states.

The EU has also fostered regional and global cooperation by becoming a legal entity and thus allowing it to sign treaties and agreements on behalf of its member states. It has also undertaken a single currency and promoted common legislature on issues pertaining to justice among member states and the introduction of common currency/fiscal policies.

Institutional Structure

The EU has several institutions which help to maintain and strengthen the integration process. Among the main ones are the European Parliament, the Council of Europe, the European Council, the European Commission, the European Court of Justice, the European Central Bank, and the Court of Auditors.

However, the two institutions which are the most relevant for the development of the union are the Council of Ministers and the European Court of Justice (ECJ). The Council of Ministers is an intergovernmental body; it is composed of the representatives of member states and its president is rotated every six months.

There are two approaches to voting in the Council of Ministers, they are by unanimity for taxation, cultural and social spheres or by qualified majority for the environment, transport or internal market. Therefore, “It is possible for EU legislation to become Community law against the wishes of a member state” (McDonald 2005, 16).

The European Court of Justice (ECJ) is in charge of interpreting the union’s laws. The Court has three sub-courts; namely the European Court of Justice, the General Court and the Civil Service Tribunal (Archer 2008, 144). It is the final body in handling the conflicts between member states, businesses and individual.

It has been designed to listen to cases whereby a nation has breached the EU directives, has been sued, if a member of the union has failed to take the required action, due to a directive from the European Commission or based on decisions of the national courts of member state (Aqin 2009,166).

Current Achievements/Failures

The EU has been a successful union with many achievements to its name. These include effective common legislature, joint venture programs to boost regional unity, improved peace and security within the region- 60 years of peaceful relations, the reduction of cost of living of members of the region, and the promotion of trade and economic cooperation among members. The EU has adopted an effective Common Market policy, results which can be seen in the economic prosperity of the region.

In 2002 the national currencies in 12 member states were replaced with Euro Notes, excluding one of the hindrances for more effective cooperation within the bloc and providing new opportunities for further economical integration of the region. Previously, the shortcomings of the region included: poor energy policies and failure to agree on common security/military policies (Edwards 2002, 43).

The Lisbon Treaty which was signed on December 2007 and came into force on December 2009 was aimed at addressing the issues of new energy sources and security threats. As the result of negotiations between the EU’s 27 member states, the Treaty covered the coherent tools for the union to strengthen the common energy and security policies (“Taking Europe into 21^st Century”). However, concentrating on the internal restructuring, the EU underestimated the importance of foreign policy.

The current EU’s foreign policy chief Catherine Ashton did not attend the Asem summit and the meeting of Asean-EU foreign Ministers in Madrid in 2010, not demonstrating proper interest in the foreign affairs (Islam “A Seat for the EU at East Asia’s Top Table”). The appointment of Von Rompuy and Catherine Ashton as the EU officials did not strengthen the positions of the union and its infrastructure because of their relatively low profiles of representatives of their states.

Though the military sector remains the weak point of the bloc policies, the recent shift in the historical opposition between Atlanticism supporting NATO and Europeanism requiring development of EU defense institutions has been observed. The idea of creating the EU army has occurred but its realization remains distant.

Expansion vs. Integration

Further paths of development of the international arrangement gave rise to debates among the theoreticians. Some of them argued that the European Union should focus on widening by expanding to the south and to the east; others insisted on deepening the integration processes among the current members, and the third group of specialists suggested uniting the two strategies.

The EU has initially opted for the expansionist approach, but has recently switched gears and moved on to the mixed approach. In 1993, the Copenhagen European Council concluded that “the associated countries in eastern and central Europe that so desire shall become members of the EU” (McDonald 2005, 14).

The potential members had to meet the three criteria: democracy, developed market economy and the ability to adapt to the Community strategies. At the same time, the process of geographical expansion was parallel to deepening the integration. Thus, both strategies of deepening and widening are significant for further development of the EU and cannot be separated.

Prospects for the Future

Along with all the achievements of the European Union, it has a number of challenges which need to be handled for future effective cooperation of the member states. Flexibility is one of the key aspects of the future prospects of the European Union.

“A particularly important form of flexibility in the EU is differentiation: that is policy development and activity in which not all member states are involved” (Nugent 2006, 585). An example of implementation of this approach is the open method of cooperation for handling some of the social issues. Thus, the emphasis is partially shifted to networking among the member states instead of traditional legislative-based form of regulation.

The EU plans of deepening and widening approaches it is increasingly becoming a challenge for the bloc. Along with the deepening of the relationships among the members, the bloc negotiates the opportunities of cooperation with other regions and unions—including blocs such as Mercosur.

Integration in South America

Conditions in the Southern Cone and Brazil: Nationalism vs. Internationalism

The Southern Cone states and Brazil are characterized with their historical reliance on foreign capital. This aspect had a significant impact on the level of economic development of this South American sub-region, which caused an external vulnerability of these states and their currency over-valuation along with the negative social consequences in the spheres of employment and welfare provision.

The establishment of the regional bloc Mercosur in 1991 indicated the beginning of the era of regionalism, in an attempt of the neighboring countries to unite their efforts to solve their common issues and creating the conditions for a long-lasting and effective cooperation.

The South American Common Market (Mercosur) is a regional bloc composed of Argentina, Brazil, Paraguay, and Uruguay. Venezuela is currently awaiting the confirmation of Paraguay to access the union as a full member. Mercosur also has four associate countries namely Peru, Columbia, Bolivia, and Chile.

The bloc is a result of the improvement the region has made after several earlier attempts to establish an integrated region in Latin America since 1960; it was formed in an attempt to promote free trade and movement of people within the member states (Lang 2002, 93).

Early Attempts of Integration and why they failed

Among some of the reasons for the failure of the previous attempts for regional integration in South America were the lack of cooperation among members, the priority given to individual interests instead of regional interests, the economic and political instability among countries, the lack of political and economic incentive for some member states, the international interference from developed countries with special interests in Latin America, and the general lack of international political goodwill (Dominguez 2004, 65).

The formation of the South American Common Market (MERCOSUR)

Mercosur evolved from LAFTA (Latin American Free Trade Agreement) that was formed in the 1960’s to promote free trade among Latin American states (Fabbrini 2005, 84). In the 1980, LAIA replaced LAFTA, changing the free trade zones with preferential trade zones. The conditions presented by this union encouraged bilateral trade activities between the member countries.

In 1986 Brazil and Argentina signed a set of commercial protocols that gave way to the 1988 Integration, Cooperation and Development (ICD) treaty. The ICD treaty was geared towards the formation of a free market between the two countries in ten years.

Argentina and Brazil saw the need to integrate with Paraguay and Uruguay, mainly because of the great “historical debt” they have towards their smaller neighbors— especially with Paraguay, taking into account that Argentina and Brazil devastated Paraguay in the Triple Alliance War (1865-1870) (Mattli 1999, 116) and the need the need for more markets to export their products. The decades of cooperation between European states became a useful experience, which provided many solutions to the common problems.

The initial agreements of Mercosur were focused on domestic regional policies for accommodating the variety of interests of the member states. The prevailing principle of this bloc is the open regionalism which presupposes the unilateral trade liberalization and the attraction of the Foreign Direct Investment (FDI) flows (Phillips 2004, 86).

Mercosur is geared towards the promotion of free flow of goods and services, the formation of laws and legislature which aids the integration, and the adoption of a singular trade policy and the development of policies that encourage competition and economic cooperation among its member states.

Current Institutions

As Mercosur is developing as a bloc, its various institutions are also evolving. The current institutions are namely the Common Market Council, The Common Market Group, The Administrative Office, Parlasur (Mercosur’s Parliament), The Trade Commission and the Work Subgroups. The Common Market Council is the top level institution of Mercosur, since it has the authority to conduct the policy of the bloc (Mace 1999, 132). The Council is made up of one government representatives from each member state.

The Common Market Group is the executive body of Mercosur. It is responsible for ensuring that member states adhere to the signed treaties and for implementing the decisions of the Common Market Council. The Administrative office of the union is responsible for the research and records for the union (Hass 1958, 190).

Parlasur (Mercosur’s parliament) is the law-making body of the bloc. As compared to the EU’s bodies, the level of it’s institutionalization is rather humble and Parlasur’s consultative status how distant it is from the construction and functions of a real legislature (Dri 2009, 69). The Works Subgroups, on its part, assist the Common Market Groups.

The Trade Commission assists the executive and to promote the free and fair trade among member states. Finally, the work subgroups work under the Common Market Group and serve to collect data on various aspects of the union such as commerce, fiscal policy, social security, employment and on different policies that are pertinent to the union (Dominguez 2004, 94).

For now, the main objective of Mercosur’s bodies is the achievement of consensus between the governments of the member states so that later the level of supranationalism from EU bodies can be achieved.

Though the idea of adopting the model of the EU Parliament was not supported previously, the recent changes made to Parlasur made it even more democratic and increasingly more similar to the EU’s parliament. The people from each member state are now able to vote for their representatives (Williams 1996, 126).

Degree of success/failure: Policy Coordination

Some of Mercosur’s major achievements include: the improved trade and cooperation among members, the bloc has expanded greatly since its inception and economic growth among member countries has increased as there has been significant improvement in the GDP of member states (Mora 2003, 95). Achieving the objective of crating the conditions for the free movement of goods, about 89 % of intra-Mercosur trade was tariff-free.

The majority of goods with the exception of motor vehicles and sugar have paid zero tariff rates since late 1990s (Bouzas 2008, 2). In the case of Paraguay and Uruguay, their economies are significantly growing within the last few years. In 2010, Paraguay is expected to grow over 10 percent, becoming the leader in economic recovery in Latin America. As for the other Mercosur countries (Argentina, Brazil and Uruguay) they have also grown at considerably high rates; proving that Mercosur is emerging strong from the recent economic crisis.

Some of the limitations of the union are: the lack of cooperation among member states on certain issues (i.e. mainly because of the opposition of Argentina and Brazil on certain issues that are beneficial towards the development projects in Paraguay and Uruguay), some political issues that were reflected in the weakening of Mercosur’s institutions.

For instance, the reliance on the parliament of Brazil for the disbursement of Mercosur’s Convergence Funds (FOCEM) that are used to finance infrastructure projects in the weaker economies of the blocs.

In the ongoing project to construct a 500 Kv powerline in Paraguay, which is urgently needed in the country before 2012 to avoid a major economic catastrophe, Brazil is putting several obstacles and using its economic power as a political tool to maintain an almost “hegemonic control” over the bloc— a situation that is angering the other Mercosur members.

The Itaipu dilemma and the related negotiations drew the public attention to the problems of regulation of the relationships between the member states inside of Mercosur. According to the terms of the 1973 Itaipu 50-year Treaty, Paraguay is obliged to sell the largest portion of its unused energy (about 90%) at low price although each country owns 50 % of the enterprise (Nickson “Revising the Past”).

The Itaipu Treaty is set to expire in 2023; however, in 2009 Brazilian President Lula promised to offer a “better deal” to Paraguay. It means that Mercosur implements an intergovernmental approach to settling the conflicts between the member states as opposed to EU in which the functions of ECJ include regulating the relationships between the members.

The Lula-Lugo Agreement from 25 July 2009 indicated the beginning of a new stage in the Itaipu negotiations (Codas “Nueva Etapa Se Abre Con La Línea De 500 Kv”). Reaching the consensus, the interested parties planned the beginning of the 500 Kv construction project for the end of 2010.

The 500 Kv construction project can provide jobs to many citizens in Mercosur countries and will positively affect the Paraguayan economy (i.e. reducing poverty and inequality in the country), as well as give energy security to the rest of the region; taking into account that the Bi-national hydroelectric repress provides a considerable amount of energy to the bloc.

The main achievements of Mercosur include the decrease of the tempos of inflation within its member states and the stabilization of the economic growth of the states of the bloc without decreasing the level of employment in the region.

Model to be followed: The EU Model?

Mercosur is expected to grow and evolve within the next few decades. However, this will be a gradual process and might take extra effort from its members before achieving the level of development of the EU and other established unions (Luis 2007, 51).

On the one hand, adopting the experience of the EU and following the model of the institutional structure of the European bloc and its schemes of decision making would be beneficial for the Mercosur. On the other hand, it is important to consider the differences between the regional unions and the peculiarities of the current situation before implementing the same strategies.

It should be noted that at present time, Mercosur is at its core stage of development. Because of the region’s unique historical background and conditions and peculiarities, Mercosur might not obtain the same results using by using the strategies the EU uses. It should be carefully analyzed which are the strategies that are optimal to enhance the effectiveness and exclude those that are not.

Comparison Between Mercosur and the EU

The History of Bilateral Relations and Inter-Regional Cooperation

The negotiations between the EU and the Mercosur started soon after the establishment of the two blocs, specifically aiming at strengthening their economical ties. Within the latest decade, the relationships between the EU and the Mercosur have expanded significantly to include other important areas. These two unions have signed bilateral trade agreements and continued to carry out inter-regional cooperation policies.

In 1991, the EU signed a bilateral agreement with Argentina and later signed another agreement with Brazil, Paraguay and Uruguay in 1992. These bilateral agreements were meant to promote trade between the two the countries of the two regions, promote industrial cooperation, foster exchange of agricultural technology, conservation and protection of natural resources and economic partnership.

In 1995, a more comprehensive agreement was signed between the EU and all Mercosur states. This agreement covered trade between the unions, integration issues between the unions, economic cooperation issues and institutional issues.

This agreement was meant to promote free trade and cooperation between these two unions, but at the same time operate according to the World Trade Organization (WTO) policies. This agreement also addressed the need for a more complete education and training of the youth in the EU and Mercosur and its importance on the future of the bi-regional integration.

Concurrent Goals/Objectives

Though Mercosur and the EU aim at the broader goal of global integration, these two blocs have a number of differences in their institutional structure and processes of policy-making. Both the EU and the Mercosur have many similar objectives but implement different strategies for achieving the results.

The difference is the weight and preference that each union puts on each of the target. For example, both unions are geared towards the promotion of free movement of goods, people and services, formulation of policies on the economy of the region and of the member states and formulation of trade policies to be used by the union and the member states (Preusse 2008, 40).

In addition, the historical backgrounds of both blocs differ significantly. In Europe, the two world wars had chaotic effects on the economies and the quality of life of citizens; therefore, promoting regional integration seemed to be the only solution in that continent. In South America, there have been mostly peaceful relations among states.

Mercosur as a bloc was not primarily intended to avoid an armed conflict, as there have been peaceful relations among its member states for a long time—with the only exception of the Chaco War fought by Paraguay and Bolivia (1932-1935). In contrast with the Latin American historical tradition, the concept of historical Pan-Europeanism implies that the EU community has always possessed a set of political and economical values which have been replacing the state-based systems of their member states.

The next important difference between the blocs is the institutional organization of the blocs, which has a significant impact on the integration processes among the member states of the unions as well as the effectiveness of their cooperation. Mercosur is headed by a Common Market Council, which is made up of the Ministers of Foreign Affairs from each member state.

On its part, the EU is headed by the Council of the EU (prime ministers and presidents) – the Council of Europe is an entirely different organization. This council comprises of ministers from member states, the secretariat, the committee of permanent representatives and the president (Rozanwurcel 2007, 179).

In terms of the EU administration, the union uses the umbrella of the Commission. The secretariat which works under the council is responsible for carrying out administrative activities on behalf of the council. All the subgroups that work under the EU are coordinated by the committee of permanent representatives. Mercosur, on its part, is made up of work groups that are directly answerable to the Common market group (Laursen 2003, 59).

Compared to Mercosur, the advantage of the EU as a bloc is its maturity. The initial European agreements root back to the 1950s. The EU has evolved from the European Steel and Coal Community that was formed in 1954. The European Steel and Coal Community later started its evolution phase by the formation of the European community in 1957. On its part, Mercosur evolved from LAFTA (Latin American Free Trade Agreement) that was formed in the 1960’s to promote free trade among Latin American states (Fabbrini 2005, 84).

EU-Mercosur Economic Relations

At present, The EU is Mercosur’s most important trade partner, while Mercosur in its turn is the EU’s ninth trade partner. During the 1990s Mercosur’s imports from the EU increased more than 235 %, while exports from Mercosur to the EU increased from $ 14.8 billion to $ 20.2 billion (Arenas 2002, 4).

It is significant that the majority of the Mercosur’s export products are agriculture-based and it makes the position of Mercosur dependent upon the external factors such as the prices on coffee or meat in the world (Lehmann “The EU and Mercosur”). Though the importance of the EU as the Mercosur’s target market for export has been decreasing during the 1990s, the EU remains its main source of import. These tendencies need to be taken into consideration for analysis of the trade negotiations between the blocs.

Trade Negotiations

During the Rio Summit in 1999, both blocs demonstrated their interest in gradual liberalization of the trade between Mercosur and EU. The seven rounds of the trade negotiations improved the cooperation between the blocs significantly. The fifth round was the most significant for the development of bilateral economical relations between the blocs.

It was held on July 2001 and indicated the progress of the negotiations process because the important issues of liberalization of trade were discussed during it. The sixth round took place on October 2001 in Brussels, and it was focused on science and technology problems along with the trade issues. The seventh round took place on April 2002 in Buenos Aires when the measures for liberalization of the trade were defined.

The latest Seventeenth meeting of the Mercosur-European Union Committee took place in June-July 2010 in Buenos Aires. The delegates from the two blocs negotiated the three major spheres of future cooperation of the member unions, namely the political dialogue, trade and the creation of the Association Agreement between the regional blocs. It was agreed that the text of the proposals for the Agreement will be discussed during the following meetings.

The main achievement of the negotiations was the settlement of the issues of competition policies for the trade between the states, including the development of anti-dumping policies and the implementation of the rule of origin for the import and export of the goods (“Seventeenth Meeting of the Mercosur-European Union Bi-Regional Negotiations Committee”). The negotiation processes have demonstrated the interest of the delegates from both unions in further development of the trade and political relations between the states.

Foreign aid: Foreign Direct Investment (FDI)

Though the EU is one of the main sources of foreign aid for Latin America (especially Mercosur), Mercosur members are not among its primary targets because of their relative prosperity in comparison to other countries of the region. For this reason, the issue of the financial aid was discussed as a separate point in 1995 when the Cooperation Agreement was signed.

The primary purpose of providing the financial support to Mercosur is creating the conditions for improving the institutional structure of the union and preparing for liberalization of the trade with the EU (“Enhancing the EU’s Policy on Mercosur”).

The EU is not only assisting the Mercosur to make entry into global trade but also provides technical support to the bloc. The good relationship between Mercosur and the EU has enabled Mercosur to benefit greatly from the investments made by the EU into the region. The EU has invested greatly into Mercosur and is currently the largest foreign investor in stocks in the region.

These trade policies are geared to promoting economic prosperity of the two regions and facilitate further integration (Richardson 2006, 101). The EU is responsible for up to 20% of Mercosur’s trade revenue. This totals to an average of 80 billion dollars in a year. Such a relationship is helpful as it helps the Mercosur earn revenue that is used in improving infrastructure, building schools, building hospitals and in improving the quality of life for people in the Mercosur.

The EU also benefits by securing a supply for its products and raw materials. Critics of the aid program believe that since Mercosur is not a producer of a wide assortment of products, the focus that the EU is giving on trade with the region is unlikely to yield the expected kind of returns. However, as time progresses, those assumptions are beginning to be proven wrong (Frank 2000, 122).

Security and Defense

The cooperation between these two regions also covers some military and defense issues. The EU manufactures military equipment for export. Mercosur countries are major consumers of British military equipment. The British also provide training on the use and maintenance of the machinery.

Mercosur, like its partner the EU, is determined to implement energy efficient production systems that properly utilize the available energy (Aqin 2009, 55). The European Union is an important trade partner of the South American bloc and the issue of creating a free trade area is under consideration at the moment.

The EU has also committed itself to providing technical assistance and knowhow so as to improve the quality of medical care in the region. This is both through exchange programs that facilitate the training of doctors from Mercosur in the EU and through provision of machines and equipment for Mercosur hospitals. The agreement also facilitates the exchange of students among these regions and the sharing of knowledge between research institutions.

Conclusion

The ongoing cooperation process taking place between Mercosur and the EU can be explained with the contemporary shift from nationalism to regionalism, and eventually to globalization, in the sphere of international relations.

Effective cooperation between neighboring countries have proven to be extremely beneficial, as states started creating international arrangements to promote peaceful relations, developing common policies to get rid of the economic frontiers and the main hindrances for the development of the region in general and every individual member state of the union in particular.

This study brings to light the distinct differences and similarities of the integration processes of the EU and the Mercosur, explaining the roots of the differences and their effect on the level of integration between the countries and the effectiveness of their cooperation. The differences in the historical and economical development of the regions, the primary goals for creating the unions and the main strategies for achieving these goals became the preconditions for the unique paths of integration between the member states.

Adopting the experience of the EU, including the institutional organization and the wide range of the spheres for the integration of the countries could be advantageous for the Mercosur on the condition of adopting it to the peculiarities and needs of the South American region.

The main challenges of Mercosur as an intergovernmental bloc include the asymmetry between the member states which is caused by their disproportionate economical development and the lack of institutionalization within its structure. These regional peculiarities are the significant hurdles for using the EU model for future development of Mercosur, its bodies, inner and foreign policies.

Brazil as the Mercosur’s dominant power has established bilateral relationship with EU since 2007 and this shows how a trend towards global open economy can hinder bilateral regionalism.

Considering the fact that the bilateral economical relations between EU and Mercosur cannot be defined as harmonious, and comparing the figures of export and import rates as well as the range of goods in both categories, it should be concluded that Mercosur with its primarily agricultural orientation is dependent upon numerous external factors along with the trading terms.

Summing up all the differences in historical background, institutional structure, the economical development and distribution of resources between the member states in EU and Mercosur as well as the development of their bilateral relations, only separate fragments of EU model can be applied for further development of Mercosur on the condition of adapting them to the realities and demands of the Latin American regional bloc.

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