Running Head: Final Research Paper
Final Research Paper
BUSI 464 – International Market Integration and Trade Agreements
Professor Beverlin Hammett
Caleb Hempstead
Liberty University
March 8, 2018
Final Research Paper 2
Table of Contents
Abstract ......................................................................................................................................3
Introduction.................................................................................................................................4
What are the historical origins of Mercosur and The African Union?........................................4
What nations are member nations of Mercosur and The African Union?..................................5
What are some of the aspects that an inquiring nation need to achieve before they can apply to
Mercosur or the African Union?.................................................................................................7
What are the membership requirements for Mercosur and the African Union?.........................8
What are the possible varying memberships within Mercosur and The African Union?.........10
What are the consequences if a country violates the membership terms?................................11
What are the possible benefits and disadvantages of the Mercosur and The African Union?.13
Has Mercosur and The African Union achieved their primary goal?......................................14
What are some external factors that have affected the success or decline of Mercosur and The
African Union?.........................................................................................................................15
What are some of the internal challenges Mercosur and The African Union face?.................16
Conclusion................................................................................................................................18
Bibliography.............................................................................................................................19
Appendix..................................................................................................................................20
Final Research Paper 3
Abstract
The paper will provide an analysis on the regional trade agreements of Mercosur and the African
Union. It will provide ten research questions, developed from the syllabus for BUSI 464:
International Market/Trade Integration. It will elaborate on how these trade agreements have had
a moderate level of success compared to their activation time and the implications with the
geographical locations. Additionally, the paper will elaborate on the challenges and difficulties
that each trade agreement has gone through from an internal and external perspective. It will
walk the reader through the historical settings of each regional trade agreement. Along with their
current members, previous members, different level of membership that each trade agreement
accepts. It will also provide a perspective on the requirements for what inquiring countries need
to do to be able to join the regional trade agreement, what current members need to do to
maintain membership, and what happens when a current member violates the member
agreements. The conclusion of the paper will elaborate on the success of Mercosur and the
African Union.
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Introduction
This paper hopes to provide the reader with an analysis of Mercosur and the African
Union. My intentions with this paper are to compare and contrast Mercosur and the African
Union to show the reader that similarities and difference between these two regional trade
agreements. It will explain how two agreements on two different continents have things that are
similar to one another and things that are completely different from each other. Mercosur and the
African Union have the potential to be common regional trade agreements that the entire world
knows and purchases products from. Mercosur is a trade bloc that is geographically located in
South America. It is the world’s fourth largest trade economy. The African Union is a regional
trade agreement that is geographically located within the continent of Africa. It is one of the
world’s largest regional trade agreements, as in the number of member countries. Both Mercosur
and the African Union are relatively new in terms of regional trade agreements but have had
great amount of success in their little time.
What are the historical origins of Mercosur and The African Union?
Mercosur and The African Union are two regional trade agreements located on two
different continents. Mercosur is a trade bloc on the continent of South America while The
African Union is in Africa. However, one similar factor about these two trade agreements is that
they are both located in the Global South. Because of this, one can find many similarities
between these two trade agreements.
Mercosur. Mercosur was created to help bring inter-continental prosperity to South
America through prosperity of countries in South America. The trade bloc was established after
hundreds of years of colonization and after several years of inter-country conflicts ranging from
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wars to genocides. Through these years of difficulty, the countries of South America realized that
to achieve prosperity it would be necessary to have peace and to work together. “[Mercosur was]
created during a period when longtime rivals Argentina and Brazil were seeking to improve
relations, the bloc saw some early successes, including a tenfold increase in trade within the
group in the 1990s” (Felter, 2018). Since this realization, there has been many regional trade
agreements established in South America but none of them have achieved the inter-continental
success like Mercosur.
African Union. The African Union has similar historical origins like that of Mercosur.
The African Union was started to bring peace and prosperity to Africa through African countries
by Africans. As most individuals know the continent of Africa has had a history of abuse from
other countries and within. Whether it was countries buying slaves from Africa, countries
colonizing and taking their natural resources, or tribes in Africa having continual warfare, the
continent of Africa has struggled with obtaining peace. However, countries and citizens of Africa
have decided that enough is enough and are pursing a change with the redirection of Africa by
Africans for Africans. “The advent of the African Union can be described as an event of great
magnitude in the institutional evolution of the continent. On 9/9/1999, the Heads of State and
Government of the Organization of African Unity issued a Declaration calling for the
establishment of an African Union” (African Union Commission, 2019). Thus, The African
Union is a trade agreement, but it is more than that. It is a new vision for the entire continent of
Africa being led by Africans for Africans pursuing prosperity for a better tomorrow.
What nations are member nations of Mercosur and The African Union?
Mercosur. According to the official Mercosur website there are technically six full
member nations. These six nations are the following: Argentina, Brazil, Paraguay, Uruguay,
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Venezuela, Bolivia (Mercosur, 2019). However, also currently, Venezuela is indefinitely
suspended because of its human rights violation, and Bolivia is pending acceptance, waiting on
approval from Brazil’s congress. Additionally, there are six different associated members of
Mercosur. The six associated members are the following: Chile, Columbia, Ecuador, Guyana,
Peru, and Surinam (Felter, 2018). These six associate members of Mercosur experience different
rights and concerns which will be discussed at a different point. However, because of the
exceptions of the associate members, indefinitely suspended Venezuela, and Bolivia’s pending
official acceptance, Mercosur is acting and successfully operating with four active members.
Additionally, compared to the continent of South America with a total of twelve countries,
Mercosur, currently, only has four of them, one-third of the continent’s countries, actively
engaged in negotiations and trade through as full members in Mercosur. However, with the six
technical members of Mercosur and the six associated members of Mercosur the entire continent
does have a form of trade agreements. There has not been success with a continent-wide trade
agreement that each country abides by equal trade rules with each other.
African Union. The African Union is quite the opposite compared to Mercosur in
membership size. Currently, in the African Union there are fifty-five-member nations. The fifty-
five-member countries are the following: Algeria, Angola, Benin, Botswana, Burkina Faso,
Burundi, Cameroon, Cabo Verde, Central African Republic, Chad, Comoros, Republic of the
Congo, Cote d’Ivorire, Democratic Republic of the Congo, Djibouti, Egypt, Guinea, Eritrea,
Eswatini, Ethiopia, Gabonese Republic, Gambia, Ghana, Guinea, Guinea-Bissau, Kenya,
Lesotho, Liberia, Libya, Madagascar, Malawi, Mali, Mauritania, Mauritius, Morocco,
Mozambique, Namibia, Niger, Republic of Nigeria, Rwanda, Saharawi Arab Democratic
Republic, Democratic Republic of sao Tome and Principe, Senegal, Seychelles, Sierra Leone,
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Somali Republic, South Africa, South Sudan, Sudan, Tanzania, Togolese Republic, Tunisian
Republic, Uganda, Zambia, and Zimbabwe. (Unless need for differentiation, the title of
“Republic/State/Union of” was removed for space). However, according to the United Nations
there are only fifty-four counties in Africa. Because of this, the African Union recognize some
governmental authorities that are disputed because of current warfare. Regardless, of these few
countries, the African Union has established a presence throughout the entire continent of Africa.
This impressive feat has been accomplished through the continual coordinate efforts of all
countries. The African Union has also suspended members. Compared to Mercosur, it has
happened more often and frequently, but the African Union is located on a continent with more
undefined countries, borders and increased warfare. Additionally, the African Union has
approximately ten times more members than that of Mercosur. Specific examples of this and
more information will follow under a different point. However, compared to Mercosur, the
African Union has had a lot more success integrating the entire continent towards a trade
agreement and specific goals. This has helped the African Union retain members and maintain a
very relevant presence in Africa.
What are some of the aspects that an inquiring nation need to achieve before they can
apply to Mercosur or the African Union?
Mercosur and the African Union both have several requirements that they want for a
country inquiring to join their perspective agreement. One of the similar and shared perspective
of the two trade agreements is that they want to help countries achieve prosperity by working
with other member nations from their continent. Therefore, any country wanting to join the
perspective trade agreement needs to be from the trade agreement continent for Mercosur, one
needs to be in South America, and for the African Union, one needs to be located in Africa.
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Additionally, a couple other requirements that these perspective trade agreements would want in
nations that are interested in joining their agreements can be said as, “members of successful
trade blocs usually share four common traits: similar levels of per capita GNP, geographic
proximity, similar or compatible trading regimes, & political commitment to the regional
organization” (Enterslice, 2018). Mercosur and the African Union are interested in countries that
have similar size of GNP because they want to create an environment that pushes each other to
become better economies that have equal opportunity to compete. They are not interested in
allowing counties with significantly higher GNP into their agreements because it could
potentially ruin the original purpose of the agreement. Additionally, being in geographic
proximity that have compatible trading regimes enables the trade bloc to continue and grow
together. This establishes longer and deeper integration between the countries which adds to the
success of the trade bloc. Political commitment to the organization is also a crucial factor for the
trade agreements because one does not want one country to opt-in and out of these trade
agreements. Mercosur and the African Union are trying to create opportunities for their member
countries through economics which takes time and commitment. Inquiring countries need to be
sure that they are committed to these goals and wanting to achieve these goals.
What are the membership requirements for Mercosur and the African Union?
One of the membership requirements that is the same between Mercosur and the African
Union is that joining countries are required to be for the same continent that the perspective
agreement originated from. This is to ensure the maintaining the development of the economies
which is the primary goal of these two agreements. That is to help their continent by the
countries of their continent for their continent. Allowing exteriors members to try to join either
one of these trade agreements would defeat that purpose.
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Mercosur. According to the official Mercosur website there are four official steps that a
country must go through to be able to join Mercosur. The four steps are the following: One, an
applying nation must submit a written request to the Council of the Common Market. Two, the
Council of the Common Market must unanimously approve the acceptance. Three, the Council
of the Common Market must than negotiate acceptance terms and conditions with the applying
country. Four, the applying nations must fully implement the terms and conditions given to them
by the Council of the Common Market (Mercosur, 2019). These four steps are the primary steps
that one country must complete to join Mercosur. Each of these steps has specific standards and
test that the Council of the Common Market test but regardless the applying country must pass
each one to receive official acceptance into Mercosur. Additionally, applying countries should
have a level of understanding of the principles the bloc lives by and promotes. These are more
unofficial requirements but all member countries and countries wanting to join are still held to
these requirements regardless how unquantifiable they are. “Since its origins, Mercosur has been
based on the principles of Democracy and Economic Development, which underpins the core
values of a human-faced integration. Aligned with these, different agreements have been added
in terms of migratory, labor, cultural, and social matters, to mention a few, which are of utmost
importance for its inhabitants” (Mercosur, 2019). These principles are required. If a country
violates them, it can result in suspension even though they are not specifically detailed. Mercosur
is also trying to increase the productivity of institutions in South America. It does this by holding
members to a higher standard and punishes them by revoking their membership when they fail to
uphold these standards.
African Union. The African Union application process is much less informal compared
to Mercosur. According to BBC news there are primary two steps in becoming a member.
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Arguing that the recent joining of Morocco is a negative addition for the African Union, the
reporter states, “Morocco easily met the AU’s admission criteria. It’s geographically located
within Africa and was voted in by more than a simple majority” (British Broadcasting
Corporation, 2017). Therefore, one can infer from this report that the two steps in joining the
African Union are to be in Africa and receive a majority vote after applying. From this, one can
see how dangerously easy it is to join the African Union and why some members and
organizations are calling upon the African Union to change this process. Organizations want to
see a formal process that African countries must go through to prove their willingness to change
and adapt to the standards set forth by the African Union. However, this change has been difficult
for the African Union to adapt since, basically, almost all members of Africa are already a
member of the African Union. There are some instances where the African Union has had to
suspend or revoke membership but because of the joining process not much proof of change is
needed to be approved for readmittance. This is where most organizations and member nations
would like to see the improvement made by the African Union. Supporters would like to see a
greater quantifiable standard that countries who would seek readmission must pass before they
are give reacceptance.
What are the possible varying memberships within Mercosur and The African Union?
Mentioned slightly previously but for clarity sakes, discussed now are the possible
memberships within Mercosur and the African Union. Different types of memberships are
allowed for different types of trade between member countries and non-member countries. Some
trade agreements allow these differences to increase the over all productivity of their trade
agreement and to entice future countries, who are contemplating becoming full members, to
apply one day.
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Mercosur. In Mercosur, there are two types of memberships, full membership and
associate membership. Included with full membership is also suspended full members.
Suspended full members are technically a full member but are currently suspended from the
privileges of the trade bloc, i.e. Venezuela. Discussed earlier were the members classified in each
section. Because of this Mercosur’s negotiations with these associate members the trading has
increased dramatically in South America. “Mercosur inked trade agreements with Bolivia, Chile,
Israel, and Peru in its first decade, while trade within the bloc jumped from $4 billion in 1990 to
more than $40 billion in 2000” (Felter, 2018). Additionally, Mercosur negotiates trade deals with
outside countries such as Israel or with other regional trade agreements, such as the European
Union. As once can see, these trade deals as a bloc with other countries or other trade blocs has
dramatically increased the productivity of Mercosur. “It [Mercosur] is the world’s fourth largest
trading bloc after EU, NAFTA, and ASEAN” (Felter, 2018). These levels of membership and
international agreements have allowed Mercosur to become the fourth largest trade agreement in
the world.
African Union. Within the African Union there is only one type of membership allowed
for countries. Joining countries are either a full member or not a member at all. The African
Union does not provide associated memberships like Mercosur. Because of this lack of dynamic,
some would say it has stagnated the growth capacity of the African Union. Some organization
propose that the African Union work to re-shift its integration with other trade blocs or countries
creating outlets for more diverse and different trade. “The paper [referring to the other authors]
considers the economic objective of the AU and discusses the desirability to shift from intra-
continental marketing to intercontinental trading and investment with other continents,
diversification of her economies and strengthening of her common market, so as to impact
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positively to world trade and sustainable development goals” (Opara, 2016). This diverseness
would hopefully bring about stronger trade and more opportunities for the African Union to
increase its influence and strength in Africa.
What are the consequences if a country violates the membership terms?
For both Mercosur and the African Union, the consequences for violating membership
terms are the same. Both agreements suspended members who are not in accordance with the
membership terms. Additionally, both provided a path to concession that once achieved by the
violated member can rejoin its responsibility within the group.
Mercosur. Within Mercosur, there has been two examples of member nations being
suspended. One is was with Paraguay which regained membership after a year. The story is that
the other members of Mercosur believed that the president of Paraguay had been removed in an
undemocratic way after an intra-country dispute. However, Paraguay regained admittance after
being suspended for only one year. The second and current example is Venezuela. Venezuela
became a full member of Mercosur in 2012 but was suspended in 2016 with regards to human
rights violation. “Mercosur suspended Venezuela in late 2016, citing violations of human rights
and the bloc’s trade rules by President Nicolas Maduro’s government” (Felter, 2018). Since the
suspension, Mercosur has decided to leave Venezuela suspended indefinitely because the lack of
cooperation that Venezuela has put forward.
African Union. The African Union has had to deal with suspension of countries a lot
more often than that of Mercosur. Once reason for this is that African Union has approximately
ten times more countries than Mercosur. “The African Union has regularly suspended member-
states over coups d’état and re-admitting them when they return to constitutional rule” (BBC,
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2017). Additionally, the historical origins and the abuse of the continent of Africa is also
exponentially greater than that of South America. One thing that the African Union could do to
help curve these circumstances is to establish stricter requirements for joining. “The African
Union doesn’t make any real effort to determine whether applicants are genuine democracies
before it admits them. No steps are taken to ascertain that an applicant state has the capacity to
implement democratic policies and norms” (BBC, 2017). The external supporters of the African
Union believe that if the African Union provided more definitive requirements for joining that
these problems of suspension or neglect would happen less often within the African Union.
What are the possible benefits and disadvantages of the Mercosur and The African Union?
Mercosur and the African Union both provided their member countries with some
benefits and disadvantages. As most regional trade agreements, these benefits and disadvantages
are very similar between the two groups. This is because regional trade agreements have
primarily the same purpose regardless of location. However, it seems that in both instance the
benefits of the trade agreements out-way the disadvantages of the agreement for the countries. If
the agreement was not benefiting the member countries, member countries would leave the
agreement.
Benefits. As most regional trade agreements offer benefits between member countries,
Mercosur and the African Union are no exception to this standard. Regional trade agreements
achieve this, “By lowering trade barriers and fostering greater mobility of human and physical
capital, regional trading arrangements provide many benefits and may contribute to economic
growth in member countries. These benefits include reduced transactions costs, lower prices for
consumers, more efficient use of resources, scale economies, enhanced competition among firms,
greater certainty and investment, technological improvements, and increases in productivity”
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(Basnet, 2017). These benefits allow consumers in member countries to purchase products at
cheaper prices with the removal of governmental inflated prices through tariffs or other means.
Additionally, by allowing producers to achieve greater economies of scale when producing
products. These benefits are the primary reason that countries strive to achieve trade agreements.
Disadvantages. Just like in every situation that involves negations, one gains some things
that helps them but also gains some things that puts them at a disadvantage. Hopefully, the things
one gains out-way the things one does not gain. If they do not the individual who is losing more
than gaining should walk away from the agreement. This advice is the same with trade
agreements, countries gain some benefits and take on some disadvantages. Some of these
disadvantages include loss of sovereignty, distortion of trade, and inefficient and trade diversion.
(Enterslice, 2018). One loss of benefits that member countries lose is the loss of freedom when
trading with members outside the bloc. Once the country joins the bloc, typically, the bloc makes
decisions together on outside trade. Other examples of disadvantages of a trade bloc are
distortion of trade, inefficient, and trade diversion. These are because a trade bloc gives
preferential treatment to member countries business which sometimes causes a non-efficient
business to receive greater business than that of a more efficient company. This happens because
of the location of the non-efficient company. Typically, the non-efficient company is in one of the
member countries of the bloc. Unlike, the more efficient company that is located in a non-
member country. Specifically, regarding Mercosur and the African Union, a disadvantage that
these trade agreements place on member countries is their group trade policy. Being a member of
these trade agreements limits countries capacity with free trade or other trade agreements outside
these specific agreements.
Has Mercosur and The African Union achieved their primary goal?
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Both Mercosur and the African Union have not fully achieved their primary goal.
However, both trade agreements have made long strides and accomplishments in pursuit of their
goal but have yet to fully achieve it. Additionally, both trade agreements are relatively new and
have not had enough time to accomplish their goals.
Mercosur. Mercosur has had much success in its few years of existence. It took a couple
countries on a continent that just had just overthrown their dictators and helped these countries
achieve the fourth largest trade economy in the world. “The main goal of Mercosur is to
eliminate barriers to facilitate the free movement of goods, people, and currency among member
countries…. Although Mercosur has a long way to go to achieve its goals, member countries
have agreed to set up an institutional framework to foster economic policy coordination”
(Basnet, 2017). This foster of economic policy coordination is one of the primary success that
Mercosur has seen and that which will help Mercosur achieve its main goal going forward.
African Union. Additionally, like Mercosur, the African Union has not achieved its
primary goal. However, the primary goal of the African Union is somewhat different than that of
Mercosur. The primary goal of the African Union can be stated by, “An integrated, prosperous
and peaceful Africa, driven by its own citizens and representing a dynamic force in global arena”
(African Union Commission, 2019). By creating a unified environment with the acceptance of,
practically, all African countries, the African Union has created a foundation for it to achieve its
primary goal. In recent years, the African Union has also established a time period that it would
like to see its goal accomplished within. The time period that the African Union has set to
achieve its goals ends in year 2063.
What are some external factors that have affected the success or decline of Mercosur and
The African Union?
Final Research Paper 16
As most regional trade agreements have external factors that effect the success or decline
of their agreements so does Mercosur and the African Union. Some organizations and factors that
have brought some success to both Mercosur and the African Union are the United Nations and
the World Bank. These two institutions have promoted various ways and ideas that have enabled
South America and Africa to receive outside investment to increase their productivity. Some of
these ideas and investments included micro-financing, large scale financing, and infrastructure
development. The United Nations and the World Bank has worked closely with individuals’
nations and these trade agreements both in South America and Africa to help bring about success
with their initiatives. For clarities sake, these organizations are not the primary responsible
reason for the success of Mercosur or the African Union but are contributing factors for the
success of them. (The author wants to make it clear that Mercosur and the African Union have
seen a lot of success on their own and that the United Nations and World Bank are contributing
factors not the primary leaders.) Even though neither agreement has fully achieved its goal, both
agreements are highly successful and should continue to rise in prosperity.
What are some of the internal challenges Mercosur and The African Union face?
Between Mercosur and the African Union, they each face their own different internal
challenges. Their internal challenges are, probably, their most difficult challenges to overcome;
and the challenges that bring the most stagnation to the success of their goals. If Mercosur and
the African Union can break through of their own internal challenges, there would be almost
nothing left holding them back from achieving their goals.
Mercosur. Currently, Mercosur has two internal challenges that are giving members a
difficult time. The first challenge is that of member nation Venezuela. Venezuela was accepted
into Mercosur for its oil reserves to bring a diverse, energy dynamic economy to the trade bloc.
Final Research Paper 17
However, since its acceptance, it has refused to adapt to many of the policies and has since been
suspended for violating human rights. This has left a big weight on the other member of
Mercosur. Additionally, the second internal challenge that Mercosur faces has been the
overarching economic downturn seen by most members. Almost all member countries have seen
several years of economic downturn with increasing inflation. These trends combined with the
dead weight of Venezuela have been some internal challenges that Mercosur is currently facing.
However, with the recent events, it looks like these challenges might be ending. In Venezuela,
Brazil, and Argentina there has been several recent changes of powers that could provide an
alternative for these challenges.
African Union. The African Union faces a more complex and difficult set of challenges.
Whereas in Mercosur, the challenges are straightforward and easier to point out in the African
Union it’s not so simple. The African Union struggles with the same underlying tones that have
affected Africa for centuries: displaced people groups, warring tribes, unwanted foreign attention
for natural resources, corruption in all levels of society, male chiasmi, and many more things.
One author writes it this way, “[Africa] is characterized by a variety of challenges, ranging from
terrorism, cross border security threats, failed states, leadership failure, corruption,
mismanagement, poverty, politically induced conflicts, to mention a few.” (Opara, 2016). These
challenges are the primary purpose of why the African Union was started. Individuals within
Africa have decided enough is enough and are working towards a goal that will end these
challenges and bring prosperity to the beautiful continent of Africa.
Conclusion
This paper has provided the reader with detailed information regarding the regional trade
agreements of Mercosur and the African Union. It has shown how, why, and where these two
Final Research Paper 18
agreements were started. Additionally, it has shown some of the similarities and success between
these two agreements. Even though neither agreement has successfully brought about the desired
changed they both seek, both agreements have made the environments and their member
countries more successful together than on their own. Mercosur and the African Union will both,
one day, be common trade agreements that anyone that works in business will interact with daily.
Two regional trade agreements from the Global South have both changed their perspective
continents. As the world continues to change and globalization continues to increase, the hope
for the success of Mercosur and the African Union grows stronger.
Bibliography
African Union Commission. (2019, January 15). African Union. Retrieved January 29, 2019,
from https://au.int/
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Basnet, H. C., & Pradhan, G. (2017). Regional economic integration in Mercosur: The role of
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10.1016/j.rdf.2017.05.001
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Enterslice. (2018, September 29). Regional Trading Blocs and Its Types India. Retrieved
February 15, 2019, from https://enterslice.com/learning/regional-trading-blocs/
Fagbayibo, B. (2018, October 08). Why the African Union needs to revisit its admission criteria.
Retrieved February 14, 2019, from http://theconversation.com/why-the-african-union-
needs-to-revisit-its-admission-criteria-75479
Felter, C., & Renwick, D. (2018, September 10). Mercosur: South America's Fractious Trade
Bloc. Retrieved January 29, 2019, from https://www.cfr.org/backgrounder/mercosur-
south-americas-fractious-trade-bloc
Glas, A. (2018). African union security culture in practice: African problems and African
solutions. International Affairs, 94(5), 1121-1138. doi:10.1093/ia/iiy116
MERCOSUR. (n.d.). MERCOSUR Official Website. Retrieved January 29, 2019, from
https://www.mercosur.int/en/
Opara, N. M., Adeniyi, O., Adeyemo, T., Faith-Lois, B., & Ekeria, A. I. (2016). African union
and the challenges of development. Journal of African Union Studies, 5(2 & 3), 67-89.
Santos, S. C. (2015). Identity in Mercosur: Regionalism and nationalism. Global Governance: A
Review of Multilateralism and International Organizations, 21(1), 43-59.
doi:10.1163/19426720-02101005
Appendix
Final Research Paper 20
^Map of Mercosur in South America
^Map of the African Union in Africa
