Establishment: On March 26, 1991, presidents of the four countries of Argentina, Brazil, Paraguay and Uruguay signed the Asunción Treaty in the capital city of Paraguay, declaring the establishment of the South Common Market. The treaty entered into effect on November 29 of the same year. On January 1, 1995, the South Common Market (Mercosur) was officially opened to operation and the tariff union began to take effect.

Aim: To promote the scientific and technological progress and economic modernization of the member states, to improve the people's livelihood and to push ahead the economic integrated process in Latin America through making effective use of resources, protecting environment, harmonizing macroeconomic policies and strengthening economic complementarity.

Members: Four members: Argentina, Brazil, Paraguay and Uruguay. Chile and Bolivia became the "countries to be connected with" respectively in 1996 and 1997.

Organizational Structure: 1. The Council: The supreme decision-making organ, which is composed of ministers of foreign affairs and of economy of the member states. Presidency of the council is rotated among foreign ministers of the contracting party with a term of office being six months. The summit meeting of the member states will be held at least once a year (or several times if necessary) and the council is in charge of preparing and organizing the summit meeting. 2. The Common Market

Group: It is an executive body, which is in charge of carrying out the treaty and resolutions adopted by the Council, and putting forward proposals concerning the program of liberalization of trade, coordination of macroeconomic policies, negotiating and signing economic and trade agreements with a third country. Each member state has four official members and four alternate ones in the Group, representing the country's foreign ministry, economic ministry and central bank. The affiliates under the Group are 10 working groups respectively dealing with trade, customs, technical standards, taxation and financial policies, transportation by land and by sea, industrial and technological policies, agricultural policy, policy of energy resources and coordination of macroeconomic policies. The administrative secretariat of the Common Market Group is located in Montevideo, Capital of Uruguay.

Major Activities:

In June 1992, the 4th summit meeting of the South Common Market decided to add into the treaty of the South Common Market the clause of practicing democratic system.

On 1 July 1993, the 4th summit meeting declared that the internal trade tariff within the South Common Market would be reduced by 75% as of 1 July 1993 and another 7% would be reduced every half a year onwards. By the end of 1994 all the tariff and non-tariff barriers could have been basically abolished for the establishment of a free trade zone.

On 16 December 1994, the 7th summit meeting declared that the Mercosur would officially enter into operation as of 1 January 1995 onwards, and the tariff union began to take effect and carry out the unified tariff rate to the outside areas.

In June 1996, the Mercosur signed the free trade agreement with Chile, deciding to reduce mutually tariffs within the coming 8 - 15 years and finally realizing free trade. In September, Chile became a "country to be connected with" of the Mercosur. In December of the same year, it signed a free trade agreement with Bolivia, and the two sides committed themselves to realizing free trade in 2015. In March 1997, Bolivia formally became the second "country to be connected with" of the Mercosur. In June 1997, the Mercosur began talks with Peru in regard with accepting the latter as a member of the Mercosur in the model of "four plus one".

At the end of 1997, the Mercosur decided that from 1 December 1997 to 31 December 2000, the unified tariff rate to the outside would be raised by 3 percentage point, i.e. the highest unified tariff rate would reach 23% (not to be carried out by Uruguay and Paraguay).

In 1997, the 13th summit meeting decided to begin talks over opening service trade among the member states, and also discussed the matters concerning the institution of government purchases.

On 16 April 1998, the Mercosur signed a framework agreement with the Andes Community (La Comunidad Andina) with a view to establish a free trade zone between the two groups in 2000. On 29 June, the two groups exchanged a list of products enjoying mutually preferential tariff treatment. But the negotiation bogged down into a dilemma for the moment, and Brazil alone reached the preferential tariff agreement with La Comunidad Andina.

In July 1998, the 14th summit meeting reached an agreement on opening service trade in the fields of telecommunication, transportation, finance and energy resources. The meeting published a joint communique, declaring that the Mercosur and its countries to be connected with is a peaceful zone free of weapons of mass destruction, and stressing that the democratic system was the fundamental guarantee for the integration.

In June 1999, the 16th summit meeting set the strategic objective of establishing a regional monetary union through harmonizing the macroeconomic policies among the member countries. The meeting reiterated that no autocratic government would be allowed to exist within the Mercosur, and that the continuous implementation of the democratic system constituted the basic condition for the realization of the integration of the Mercosur. The meeting also expressed its support for the new Paraguayan government that was established after three months of political crisis. The meeting held that strengthening internal coordination and speeding up integration process would be conducive to the regional economic and social development and deal with the stern challenges brought by globalization.

In 2000, the eighteenth summit decided to make out a unified macroeconomic policy before March 2001, put forward a proposal to establish a monetary union as the EU did and a mechanism to resolve trade conflicts, and defined the principle of mutual investment and the concrete agreement of strengthening cooperation in social fields. In the same year, the nineteenth summit decided that from 2002 all the member states should control their inflation rates to below 5% (with the exception of Paraguay), that from 2010 all the member states should control their public debts and financial deficit below 40% and 3% of their GDP respectively. The summit also decided to lower the common tariff rate to the outside area by 0.5%. In addition, the summit reached consensus over the long-debated vehicle trade. From 2001 to 2006 Uruguay and Paraguay may impose 23% import duties while Brazil and Argentina may impose 35% import duties on the imported vehicles. At the same time, Uruguay is allowed to export to Brazil and Argentina each year 20,000 vehicles, of which the domestic-made rate is no lower than 50%, and accessories worth US$ 60 million as well.

The twentieth summit was held in Asuncion, Paraguay's capital from 21 to 22 June 2001. Presidents of all member states and two countries to be connected with the South Common Market as well as President of Venezuela and Mozambique attended the summit. The summit decided to strengthen internal coordination and cooperation, to open dialogue on free trade with the United States and EU as a group and to establish relevant special negotiation teams, and to restart the negotiations with the Andes Community over free trade zone by the end of the year.

Between July 4 and 5, 2002, the 22nd Summit was held in Buenos Aires, Capital City of Argentina. As special guest, Mexican President Vicente Fox attended this summit for the first time. A framework agreement was signed between South Common Market and Mexico, allowing members of this group individually to develop bilateral free trade with Mexico. Bilateral agreements on expanding automobile trade was signed between Argentina, Brazil and Uruguay. The summit instructed the South Common Market team to study the possibility of converting the administrative secretariat to a technological secretariat, and apply the anti-dumping provisions of the WTO in the mechanisms of the standing arbitrary court of South Common Market.

Foreign Relations: The Mercosur is actively developing relations with major countries and groups of the world. In December 1995, the Mercosur signed a framework agreement on regional cooperation with the European Union, and decided to set up a transcontinental free trade zone in 2005. On 22 July 1998, the European Union Commission decided to start the negotiations with the four countries of the Mercosur and Chile on the establishment of a free trade zone. The 14th summit meeting of the Mercosur made an active response to the proposal put forward by the European Union, and coordinated the stand of negotiating with the European Union at the 16th summit meeting. In June 1999, the European Union, the Mercosur and Chile jointly declared that they would start official consultations in November on the principle, style and non-tariff issues related to the establishment of a free trade zone and start talks on tariff and sensitive products on 1 July 2001. In July 1998, the heads of the Mercosur and the countries to be connected with, signed with President Mandela of the Republic of South Africa the memorandum of understanding in regard with the expansion of trade between the Mercosur and the 14 member states of the Southern African Development Community. In May, 2002, the South Common Market and European Union decided at the 2nd Euro-Latin American Summit that another round of talks on free trade would start in July.

Up to now, the Mercosur has established dialogue or cooperation mechanism with China, the European Union, Japan, Russia and the Republic of Korea.

Relations with China: In November 1996, Vice Premier and Foreign Minister Qian Qichen wrote a letter to Foreign Minister Lanpulia of Brazil, the rotating presidency of the presiding-over country, proposing to establish a dialogue mechanism between China and the Mercosur, which received an active response and support from the Mercosur.

In October 1997, the Mercosur Delegation headed by Ambassador Aispirosa of Uruguay, the rotating presidency of the presiding-over country, paid a visit to China and held the first dialogue with the Chinese side. The delegation held talks with Deputy Foreign Minister Li Zhaoxing and Deputy Minister of Foreign Trade and Economic Cooperation Sun Zhenyu on bilateral political and economic relations and international issues of common interest. Vice-premier Qian Qichen and Assistant Foreign Minister Yang Jiechi met with the delegation respectively, and the two sides signed for the first time the minutes of dialogue.

On 9 October 1998, the second dialogue between China and the Mercosur took place in Brasilia, Capital of Brazil. The dialogue was held between the Chinese delegation jointly headed by Chinese Deputy Foreign Minister Yang Jiechi and Assistant Minister of Foreign Trade and Economic Cooperation Gao Hucheng, and the Mercosur Delegation headed by Ambassador Renato Marques, Acting President. The two sides stressed unanimously to further strengthen the economic and trade cooperation and cooperation between the enterprises. They also held consultations over promoting technical cooperation and signed the minutes of the second dialogue. The entrepreneur forum was held as well.

On October 18, 2000, invited by Chinese Foreign Minister, Deputy Foreign Minister of Brazil, the rotating presidency of the presiding-over country, headed a delegation to China and held the third dialogue with China in Beijing. Vice Premier Wen Jiabao met with the delegation. Deputy Foreign Minister Yang Jiechi and Deputy Minister of Foreign Trade and Economic Cooperation Zhou Keren held talks with the delegation respectively. Yu Xiaosong, President of China Council for the Promotion of International Trade (CCPIT) met with and held a banquet in honour of the delegation. Deputy Foreign Minister Yang and head of the delegation and Brazilian Deputy Foreign Minister Lima signed the minutes of the third dialogue.