Metalworkers and the Mercosul

Text / Maria Silvia Portela de Castro
Photos / Roberto Parizotti
Translation / Alex dos Santos and Chris Whitehouse

Financial and trade liberalization, profound technological changes and globalization of markets have produced a new geography of trade and production, based on free corporate competition and on increasing concentration of financial and technological capital in the developed and more industrialized countries.

Today, across Latin America and the Caribbean, the trade union movement is facing many difficulties and threats, both at the workplace and at sectoral levels. These challenges arise out of privatization, the opening of trade and finance and the introduction of new forms of employment contracts, featuring increased labour flexibility implemented mainly during the 1990s. Trade unions live within an environment that extends beyond national borders, forcing them to adapt to a new economic and productive setting, both domestically and abroad.

Within this context the phenomenon of market regionalization emerged and led to the creation, in 1991, of Mercosul through the association of Argentina, Brazil, Paraguay and Uruguay. This process of establishing a Common Market has been systematically monitored by the trade unions in these countries, demanding not only the adoption of instruments for social and labour protections, but equally pressing for their views to be heard and taken into account during the process of economic and trade negotiations.

Mercosul: a brief history
Mercosul (Mercado Comum do Sul - Common Market of the South), was created on March 26, 1991 through the Treaty of Assunción, signed by Argentina, Brazil, Paraguay and Uruguay. Currently, the Mercosul countries account for an estimated total population of 220 million inhabitants and a Gross Domestic Product (GDP) of roughly US$ 1.3 trillion. In 2006, Venezuela applied for membership of the bloc and is currently undergoing a transition period seeking to fulfil criteria for its incorporation.

The Treaty of Assunción sets out as objectives the creation of a Common Market formed by the States that make up Mercosul and seeks to reach a stage of free movement of goods, capital and people. The Treaty aims to create a Common Market through trade liberalization first initiated by a free trade zone, then a Customs Union and finally into a Common Market. The Mercosul has undergone ups and downs which can be briefly described in the following periods:

1991 to 1994 was clearly a period of construction with defined goals including the implementation of the free trade zone through tariff elimination, the definition of a framework for a common external tariff and the comparison and harmonization of laws and policies of the four countries within a vast list of topics and disciplines, aimed at the creation of a future Customs Union. It was a period of solid growth in terms of intra-regional trade and the end of the transition period from a closed economy into an open and deregulated economy.

In 1994, the Ouro Preto Protocol was approved and defined the institutional structure for the next stage of the process. In January, 1995, an imperfect free trade zone was initiated, where both Paraguay and Uruguay negotiated longer deadlines for the elimination of tariffs, and certain products were included in lists of exceptions as they were either considered strategic or were awaiting the promulgation of specific trade legislation. Of these lists of exceptions, only two products still fall under such condition: sugar and the auto industry.

From 1995 to 1997 the plans for foreign exchange overvaluation and privatizations came into full effect. There was significant growth in intra-regional trade and a strong growth in the extra-regional exports causing an appreciable deficit in the external balance of payments especially for Argentina and Brazil and intense external negotiations. It was a period in which few decisions were taken in non-trade related topics.

1998 to 2002 was a period marked by a crisis and fall in the levels of trade, increased decisions about political and social topics and intense external negotiations.

2003 to 2006, the period still in force, consists of strong political changes, which began when President Lula took office in Brazil and culminates with Venezuela's entry into the bloc. Except for an increased interest taken in the World Trade Organization's negotiations, this period shows a low level of external negotiations, but intense negotiations at the regional level, including building relationships with organisations seeking integration in South America. It differentiates itself from the previous periods by its political discourse and by its enhancement
of social themes.

Institutional Structure
The decision-making level of Mersosul includes the Common Market Council, the Common Market Group and the Trade Commission of Mercosul, which aims to ensure the free trade zone is finalised and to build the Customs Union. These structures where established through the Ouro Preto Protocol, which also enhanced the role of the Joint Parliamentary Commission and in 1996 created a consulting body representing civil society, the Economic and Social Consulting Forum.
After 2004 there was an important advancement in the Mercosul's structure which was driven by the new political views of the current four governments, most notably the creation of the Mercosul's Arbitration Tribunal, created in 2006 in Paraguay, the creation of the Mercosul's Parliament, set up in Montevideo, Uruguay in May 2007 and the Social Institute, set up in Assunción, in June 2007.

Addressing Labour matters
Under pressure from the trade union organisation known as the Coordination of South Cone Trade Union Centres, Mercosul since its inception has dealt with labour matters in the Labour Relations, Employment and Social Security Sub-Group (SGT10), which is coordinated by the Labour Ministries with the participation of labour and employers' organizations from the four countries.

Operating since 1992, SGT10 was able to achieve important results including the approval of the Social and Labour Declaration in December 1998, a legal instrument of a non-binding nature, which establishes a compromise between the Member States for the application of a set of basic and universal rights. These rights include freedom of association and collective bargaining, non-discrimination and equal treatment, eradication of child and forced labour, implementation of employment policies and proper vocational training, adoption of fundamental health and safety standards and the right to social protections. To follow-up on their application the Social and Labour Commission was created, a tripartite body that began operating in 2000, which submits its findings, recommendations and/or complaints to the Common Market Group.

In addition, in April 2004 the first Mercosul Conference on Employment was organized. It was a tripartite meeting and its most important outcome was the creation of the Mercosul High Level Group for Employment Strategy, which in 2007 had its Guidelines approved by the Council. The guidelines and goals set up by the strategy group include the changing of the Labour Market Observatory into an institute of tripartite composition, which will operate as a technical body intended to assist in the implementation of new employment policies.

Political changes and the new challenges
With the election of President Lula in Brazil in 2002, President Kirchner in Argentina in 2003 and Tabaré Vasquez in Uruguay in 2004, new political winds of change started to lead the Mercosul's negotiation process and social issues gained more attention.

A significant change occurred in foreign relations policies. Mercosul refused to accept the continuation of the Free Trade Area of the Americas negotiations as well as the European Union's trade proposals, and began assuming the leadership in articulating the demands of many developing countries in trade negotiations within the World Trade Organisation. At the regional level, Mercosul began driving the advancement of the Union of South American Nations and the complex process of energy integration including the construction of gas pipelines, extension of lines and the use of bio-fuels.

Another very important aspect was the renewed construction of the common market through the Working Plan 2004-2006, a new schedule of goals approved in Montevideo at the end of 2003. This working plan, unlike former ones, includes among the main issues of trade integration, issues such as citizenship, labour and social rights, integration of the means of production, and the creation of the Mercosul Parliament.

In 2004, ten years after the adoption of the Ouro Preto Protocol, the Mercosul Heads of State decided to seek effective ways to reduce the structural and political asymmetries existing between the four partners, thus taking an important step towards the consolidation of the bloc. This decision was a result of the strong pressure exerted by the smaller countries, particularly Uruguay, and the first steps began in 2006 with the creation of the Mercosul Fund for Structural Convergence, which holds the following objectives: "to fund programs promoting structural convergence; to develop competitiveness; to promote social cohesion, in particular of the smaller economies and less developed regions and to support the operation of an institutional structure and the enhancement of the integration process."

The initial annual amount of contributions of the Member States to the Fund will be US$ 100 million, integrated on the basis of an historic average GDP of Mercosul: Argentina -- 27 per cent, Brazil -- 70 per cent, Paraguay -- one per cent and Uruguay -- two per cent. As to resource allocation, this will be according to the following percentages: Paraguay will receive 48 per cent of the resources, Uruguay 32 per cent, and both Argentina and Brazil will each get 10 per cent. The Fund began its operations in 2007 and in January the first seven projects to be funded were approved, most of which are in Paraguay.

Another aspect to be noted is the enhancement of the social and citizen agenda of Mercosul. For example:

•    the organization of the Regional Employment Conference (2004) and the creation of the Employment High Level Group (2005);
•    the creation of the Family Agricultural Specialist Meetings in 2004 and of Youth (2006);
•    meeting of the Human Rights High Authorities (2005);
•    Working Group on the Racial Issue -- 2006 and the Social Leadership (Cupulas Sociais) in 2006 and 2007, supported by the Governments and with the participation of dozens of social entities.

In analysing the Common Market Council Decisions over the last few years one can see that, from 2003 onwards, a greater concern over social and political issues emerged and especially a very strong wave towards the enhancement of Mercosul and South American integration. In quantifying the types of Council Decisions according to the themes referred to in their titles, one sees that about 30 per cent refer to issues linked to the establishment of free trade, such as trade norms, technical standards, trade in services and intra-Mercosul trade activities and activities with countries belonging to the Latin American Integration Association, 18 per cent are about the structure of Mercosul, and the remainder are spread over a diverse agenda. But if we are to separate the Decisions and consider them chronologicially (see chart below), we can see how new themes have emerged during this last period.

From 2004 onwards, the Council's decisions on trade and institutional decisions were considerably reduced. One can hazard a guess that this fall in the number of trade related decisions was a consequence of greater politicization of the process, with the consolidation of a regional policy and the establishment of more demanding parameters in external relationships. However, several problems need to be mentioned such as the deepening of the trade imbalances and the asymmetries between the smaller
and the larger partners and the difficulties in adopting
a regional production policy. These problems are only
now starting to be addressed through the integration
of the value chains, incorporation of the small and micro-enterprises into the network of suppliers with the aim
of creating a genuine regional consumer market capable
of generating quality employment.

The role of the metalworking trade unions
The trade union movement of the Mercosul countries continues to actively follow and participate in the process, with a direct presence in some of the institutional structures, particularly some technical sub-groups and in the Economic and Social Consultative Forum. This unified action is taking place with the support of the Regional Inter-American Workers' Organization (ORIT) through the Coordination of South Cone Trade Union Centres, a body created in 1986, consisting of the following trade union centres:

•    Brazil: CUT (Confederação Única dos Trabalhadores), CGT (Confederação Geral dos Trabalhadores) and FS (Força Sindical);
•    Argentina: CGT (Confederación General del Trabajo);
•    Paraguay: CUT (Central Unitaria de Trabajadores); and
•    Uruguay: PIT-CNT (Plenario Intersindical de Trabajadores - Convención Nacional de Trabajadores).

In 1991, the trade unions issued their first public pronouncement about the recently created Mercosul with the following assessment: "The trade unions are committed to integration, on condition that it is genuine integration that guarantees social, political and cultural protection and that changes to the structure of production are not to the detriment of workers and the general public."

During the 93/94 biennium, one of the priorities for the trade unions was to formulate proposals about the main trade and production issues and the creation of a Fund for the support and funding of production re-conversion. These proposals were presented to the Ministries of Industry in 1994, but were all rejected as they did not coincide with the policies of the then neo-liberal governments.

The Metalworkers' Trade Union Commission of Mercosul played an important role in this process and provided important inputs and proposals to the trade unions' formulations. During this process, and on various occasions, it was also supported by IMF's Regional Office.

In the second half of the 1990s, the metalworking industry in Argentina and Brazil faced serious consequences arising from industrial deregulation policies and mainly from the adoption of a fixed exchange rate. Both employment and salaries were drastically affected and trade union work was focused on dealing with the crisis. During this period, the Metalworkers' Trade Union Commission, the majority of which is made up by IMF affiliate trade unions, remained practically inactive on Mercosul issues.

Following the political changes that occurred in Brazil in 2002 and Argentina in 2003, the region's metalworking industry is experiencing a recovery and trade unions have been strengthened at the national level and have resumed their activities at the level of Mercosul.
It should be noted that important industrial segments, such as the auto and metalworking sectors, have grown considerably: for auto the intra-regional trade is again growing, today representing more than 30 per cent of the trade balance between Brazil and Argentina, while in the metalworking sector there has been a strong increase in Argentinean and Brazilian exports to third party markets (fortunately they do not compete against each other). It should also be mentioned that in both sectors there is a very strong presence of multinational companies, which control the production and trade chains in the region and are present in virtually all countries.

The Metalworkers' Trade Union Commission of Mercosul, which was coordinated by the National Confederation of Metalworkers (CNM/CUT) in Brazil between 2004 and 2006 and, from May 2007, by the Metalworkers' Trade Union (UOM) in Argentina, is working towards the creation of common demands, especially in these two sectors. The trade unions have been discussing the need to exert pressure for the formation of workers' committees within the same corporate groups operating within the Mercosul region, as well as for the negotiation of common salary thresholds with respective employers' organisations.

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The IMF working party on trade and development meets in São Paulo, Brazil in September to discuss the situation with bilateral and regional Free Trade Agreements, their repercussions on the metal industry and trade union responses.