The Trade and Cooperation Nexus: How Does the MERCOSUR-EU Process Measure Up?

Mar 2003
The objective of this study is to analyze the interaction between trade and non-trade cooperation in some of the today's major regional initiatives, particularly those between developing and industrialized countries. The study suggests a framework to explore what the paper calls a "trade and cooperation nexus". The modalities of this nexus can take different forms. For instance, non-trade cooperation may be an integral part of a formal trade or integration agreement, or may take place independently of such an agreement, as an ex-ante, ex-post or parallel agreement. This paper analyzes the EU approach, which proposes an unusually tight trade and cooperation nexus based on a three-pillar approach uniting political, economic and trade cooperation under a single umbrella agreement. Theoretically this approach should be attractive, especially in North-South agreements, because the promise of linking free trade with cooperation programs could enhance the benefits of the former for both parties. However, while innovative, the nexus is challenging in its construction and delivery. The paper will explore EU efforts in this area in the broader context of what is happening in other North-South initiatives.