| South American Common Market (Mercosur): Draft Preferential Trade Agreement
Mercosur submitted two draft agreements, a framework agreement and a preferential agreement, with Egypt as a step towards the establishment of a free trade area between the two parties in response to the Egyptian draft. The framework agreement was studied, reviewed and signed in Argentina on 7-7-2004 on the sidelines of the Mercosur Summit meetings and en route to the initial negotiations on the preferential agreement.
The creation of a preferential agreement with the Mercosur is deemed the best option from a practical point of view to access the markets of its member countries as an alternative to a free trade agreement for the following reasons:
1-Egypt has a substantial trade balance deficit with Mercosur, reaching USD 736.8 million in 2003.
2-Mercosur countries have well diversified industrial and agricultural production in , which has resulted in a USD 27 billion trade balance surplus with the rest of the world in 2002.
In the industrial field: the group is considered to be one of the main producers and exporters of cars, planes, iron, steel, and textiles. The textiles industry is particularly strong in Brazil and Argentina. In fact, it constitutes 12% of Brazil’s GDP and employs 3 million people. In addition, Brazil is ranked number three in garments production and number seven in yarns production in the world.
In the agricultural field: Mercosur is one of the most significant producers and exporters of agricultural, processed agricultural, fish, and meat products in the world. Its agricultural exports are a fundamental component of national income and a strategic source of foreign currency. Leading agriculture exports are soya beans, sugar, coffee, orange juice, lemons, cow meat, corn, wheat, fruits and vegetables.
In this regard , the two parties have agreed upon the basic principles that will direct the coming negotiations meetings on the 16 th of October 2008. furthermore, the two parties currently negotiate the possibility of establising a Free Trade Area between them.
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