Empty Promises and Nonincorporation in Mercosur

Abstract

ABSTRACTWhy do the member states of the world’s fourth-largest trading block incorporate only about two-thirds of all policies they adopt? This article argues that empty promises are an important reason for Mercosur’s incorporation problems and that Mercosur’s institutional design furthers such a defective behavior. Member governments easily sign agreements whenever they are rewarded for the mere act of doing so. However, if they expect high costs from implementing these policies, they try to avoid incorporation. Since only the last state to incorporate a policy triggers its overall legal validity, Mercosur’s members can easily veto any agreement ex post. In addition to empty promises, mismanaged drafting and incorporation and the abuse of negotiation power also pose important obstacles to incorporation. Free riding, however, does not play a role. Due to the incorporation rules, there can be no externalities that incentivize unilateral defection. The article substantiates the arguments empirically with the multivariate analysis of the complete incorporation record of 1,033 policies adopted between 1994 and 2008.