Domestic Constraints on Regional Cooperation : Explaining Trade Conflict in Mercosur

This article seeks to account for the seemingly erratic patterns of conflict and cooperation observed in MERCOSUR since 1995. It argues that the marked deterioration of trade and diplomatic relations between Argentina and Brazil in the late 1990s and early 2000s is best explained in reference to domestic political constraints on inter-state cooperation. Two domestic-level dynamics shaped the national preferences for regional cooperation of Argentina and Brazil: state-society relations and intra-state cleavages. The recurrent instances of defection in the late 1990s reflected not only societal pressure but also the macroeconomic and political calculations of national policymakers. Tension among different state agencies sharing power over regional policy making further undermined the coherence of member states’ behavior toward their regional commitments. This “second-image” explanation of conflict in MERCOSUR is illustrated with case studies of three major trade disputes between Argentina and Brazil: the 1995 automobile sector crisis, the 1999 footwear industry dispute, and the 2001 conflict over the common external tariff