The problems faced by Mercosur have increased in recent times. These issues raise questions about the willingness of the member countries to continue developing a joint economic space and about the credibility of the agreed ground rules.

One of these issues has called into question, with very concrete situations, whether the preferential trade agreements negotiated with non-members of LAIA should have a bilateral scope only with single Mercosur members or if they must always be concluded with the participation of all members.

What would be at stake, in this case, are the fundamental rules of Mercosur, at least as the process was envisioned at the time of negotiating the Treaty of Asuncion. Thus, it would not simply be a matter of a possible contradiction with a rule of the Common Market Council, as in the case of Decision 32/00.

The good news is that none of the parties to an eventual bilateral trade agreement between a Mercosur member and a third country would seem to have any interest in provoking negative effects for the integration process. This being so, there would be at least three ways to avoid a deep crisis that would jeopardize the future of Mercosur.

One would be to modify the provisions of the Treaty that contradict the scenario resulting from possible bilateral preferential trade agreements between a Mercosur member and a third country.

The other would be to ensure that any bilateral agreement between a member country and a third country does not include commitments that contradict the rules of the Treaty.

And the third would be to incorporate what is negotiated within any bilateral agreement between a member and a third country into an agreement involving all Mercosur members and the third country, which includes commitments and differential tariff regimes, especially in favor of those countries of smaller economic dimension or lesser relative economic development.

In recent times, the problems faced in the development of Mercosur have become more significant. In some cases, they raise questions about the real willingness of the member countries to continue developing a joint economic space and about the credibility of the agreed ground rules In any event, these are issues that may affect the level of confidence generated by Mercosur's rules, especially among third countries and, above all, in those who need to make investment decisions based on the expanded market.

The possibility that a Mercosur member could negotiate a preferential trade agreement with another country that is neither a member of Mercosur nor of LAIA is an issue that has placed the integration process in what may well become an existential crisis. This is not the only setback that can be observed in the functioning of Mercosur, but it is certainly one that can pose very serious problems.

It is a question that has cast doubts on whether preferential trade agreements negotiated between any Mercosur member with third countries (non-members of LAIA) could just have a bilateral scope or if they should always be concluded with the participation of all Mercosur members.

In recent times, the initiative of a possible preferential trade agreement between Uruguay and China has been mentioned. The fact that something similar might happen again in agreements with other countries (the United States is often mentioned as a possibility) has generated a dissidence within Mercosur that may have implications for the idea of continuing to develop the joint project between its members.

If it were to materialize, the agreement with China would be an initiative that could infringe fundamental rules of the Treaty of Asunción. It is worth noting that such rules were a result of the context in which the founding treaty was negotiated, that was marked by the U.S. government initiative to build a hemispheric network of bilateral free trade agreements that would later be known as the "Initiative for the Americas". For obvious reasons this was not a minor issue from the perspective of Argentina and Brazil. It even played a role in Chile's decision to disassociate from the process that culminated in the creation of Mercosur. In fact, the agreement between Chile and the US was concluded shortly after Mexico signed its free trade agreement with the US.

Article 1 of the Treaty of Asuncion, which refers to the common external tariff and the adoption of a common trade policy in relation to third countries, Article 2, which states that the Common Market shall be based on the reciprocity of rights and obligations among the Party States, and Article 5, which highlights the common external tariff as one of the main instruments of the constitution of the Common Market, are examples of essential rules of Mercosur's founding pact to be taken into account in the development of negotiation strategies with third countries.

Decision 32/00 of the Common Market Council is often mentioned as the one establishing the restriction on trade negotiations of member countries with third countries. However, this is not the case. Just by reading Article 1 of Decision 32/00, it is clear that it simply reiterates what the Treaty had already established: "to reaffirm the commitment of the Mercosur Member States to jointly negotiate trade agreements with third countries or groups of countries outside the region in which tariff preferences are granted". The signal then is clear: the restriction arises from the Treaty itself and not from a Council Decision.

Today, at the beginning of a new Mercosur presidential term, there are different perspectives and opinions on the issue of possible international bilateral preferential trade agreements among its members.

These differing points of view imply the possibility that if a bilateral agreement between a Mercosur member and a third country were to materialize, especially with a relevant country of the global trade system that is not a member of LAIA, this could lead to a crisis that could result in a formal fragmentation of Mercosur, or render it completely irrelevant.

The good news is that none of the parties involved in possible bilateral preferential trade agreements between Mercosur members and third countries would seem to have any interest in provoking such effects.

This being so, there would be at least three ways to avoid a deep crisis that might affect the future of Mercosur:

• the first would be to modify the Treaty rules that would be at odds with the scenario that might result from any bilateral preferential trade agreements signed between a Mercosur member and a third country;
  
  
• the second would be that any agreement that a Mercosur member negotiates with another country does not include bilateral commitments that contradict the above mentioned rules (articles 1°, 2° and 5° of the Treaty);
  
  
• and the last would be to incorporate what is negotiated in any agreement between a member and a third country into a larger agreement involving all Mercosur members and the third country, including commitments and differential tariff treatment, especially in favor of countries with a smaller economic dimension or lesser relative economic development.

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