2. 1. MERCOSUR Overview 2. Established MERCOSUR I.Established Background II.Established Process 3. MERCOSUR’s Economic advance 4. Present MERCOSUR I.The present II.Hot Issue 5. Prospect of MERCOSUR Content

3. The most ambitious attempt yet toward regional integration in Latin-America Four countries in South America ( Brazil, Argentina, Uruguay and Paraguay ) joined together to create the Common Market of South America in March 1991 and signed at Jan 1, 1995 Middle forms of FTA & Customs union as adopted CET( Common External Tariff ) 1. Overview

4. The scales of physical ( Population : 4.3%, Area : 8.9%) on MERCOSUR is high in the world. But, relatively percentage in their economic scales ( GDP :1.8%, Exports : 1.5%, Imports : 1.0% ) is low. By PPP( Purchasing Power Parity ), MECOSUR has substantially huge market volume. => 1800 billion$ ( 4% in the world economic scales ) 1. Overview

5. Regional ideas reinforced by reciprocity and economic cooperation => Competitive relations ☞ Cooperative relations Brazil, Argentina, Uruguay and Paraguay convert their industrial strategies => Internal substitution on import industries ☞ External substitution on export industries Foreign direct investment has been increased in the world. => Aid, Loan, Invite capitals or technology 2. Established Background

6. ◆ “ Previous MERCOSUR “ 1990, signed “Agreement of Buenos Aires ” => Market Integration by Privatization & Liberalization 1991, Uruguay and Paraguay participated in regional integration In result, signed “Agreement of Asunción ” at Jan 1, 1995 => Abolished of internal tariffs & adopted CFE( Common External Tariff ) 1995, “Declaration of Iguasu ”  Established between Brazil & Argentina for economic development 2. Established Process

7. ◆ “ Advanced to Custom Union ” 1991, Established FTA => 1995, Customs Union => Internal progress as to extend internal trades 1994, For Customs Union signed by “Protocol of Ouro Preto” => “ Regime of Adequation ” & gradually cut tariffs to 1999 => As a result, all of products is non-tariffs from Jan 1, 2000 Exceptional products ( cars, sugar and so on) 2. Established Process

8. ◆ “ Advanced to Custom Union ” Under the FTA - Among member countries of goods, services and free movement for 31 December 1994 to remove tariff and non-tariff barriers. 2. Established Process DateImport tariffs 1991. 6. 30 1991. 12. 31 1992. 6. 30 1992. 12. 31 1993. 6. 30 1993. 12. 31 1994. 6. 30 1994. 12. 31 47% 54% 61% 68% 75% 82% 89% 100% MERCOSUR's regional tariff reduction schedule

9. ◆ “ Advanced to Custom Union ” For some items, apply a rule to a case to set the suspension system => Regime of Adequation => Except for some special items duty-free trade vision for all items 2. Established Process Argentina and BrazilUruguay and Paraguay 1995-- 199625%- 199750%25% 199875%50% 1999100%75% 2000100%

10. ◆ “ Advanced to Custom Union ” 2. Established Process The main items in an average of MERCOSUR Common External Tariff SectorCommon External Tariff Mineral Products2.4% Chemical Products7.2% Agriculture Products7.5% Plastic Products11.9% Electrical Products12.6% Food & Beverage14.7% Transport Materials14.9% Textile17.1%

11. Trade increase => Rapid increased in Internal trade compare with External trade FDI increase => Expand investment & diverse investment 3. Economic advance

12. Venezuela joined with MERCOSUR at July 2006 -MERCOSUR countries in South America 's economy, with 66-76% of the existing enlarge => effected the economic as big scale - Population : 250 million people - Area : 1,200 ㎢ ( per thousand ) - GDP : 1 trillion dollars ( Make 300 million U.S. dollars trade volume ) 4. The present

13. The reason Venezuela to join MERCOSUR => Economic logic < political logic Venezuela imports of raw materials and consumer goods ( Except that the majority of the oil => mighty oil power ) MERCOSUR common external tariff is to accommodate the case in future trade deals to get moved to a large burden of the situation ☞ The ultimate destination is Building anti-American line in Latin America 4. The present

14. The largest economic bloc in Latin – America “ Widen & Deepen ” policy  Widen => Expand the base of MERCOSUR  Deepen => Brazil & Argentina used to their currency payment on trade from 2007 => Integration fund on development ( ☞ 1.2 billion us$ ) The leap on new MERCOSUR in EU forms 4. The present

16. Brazil VS Argentina, Uruguay, Paraguay & Venezuela  Economic pie Brazil = 4 times of Argentina Brazil = 6 times of Venezuela Brazil = 49 times of Uruguay Brazil = 109 times of Paraguay Trade dispute possibility between Brazil – Argentina Withdrawal possibility of Uruguay & Paraguay in MERCOSUR 4. Hot issue CountryCounterpart20022003200420052006 Paragua y Total-560-624-1,026-1,524-1,448 MERCOSUR-293-349-656-653214 Brazil-125-193-509-530-312 Argentina-275-337-517-526-323 Uruguay Total-1038-193-537-404 MERCOSUR-318-337-535-877-522 Brazil-427-418-462-638-344 Argentina4212-191-369-267

17. ◆ Chile, why is not member country in MERCOSUR? Different tariffs between Chile – MERCOSUR => Chile : 6%, MERCOSUR : 5~ 28% Focused of trade on NAFTA, EU, Asia - Countries => Especially, Chile want to joined the member country in NAFTA 5. Hot issue

18. MERCOSUR is one of the successful multilateral trade agreements in the world => But, there are many unstable factors Signed FTA with Israel => The trade scale are not big, but the main meaning is that the opening on FTA => Realized the importance of Bilateral trade 2007, established “ Banco del Sur ” => Internal economic growth => For the next progress RMF 5. Prospect of MERCOSUR

19. ◆ KOREA – MECOSUR FTA 5. Prospect of MERCOSUR Macro-economic effects of KOREA-MERCOSUR FTA ( Unit: %, even millions of )