LATIN AMERICA:
Mercosur Trade Bloc Does Not Fear EU Expansion
Marcela Valente*
BUENOS AIRES, Apr 30 (IPS) - Like an ad that tempts customers with a bonus
gift, South America's Mercosur trade bloc is welcoming the incorporation of
10 new countries into the European Union (EU) at a time when the two blocs
are close to reaching an agreement on a free trade accord that has been in
the works for nine years.
The enlargement of the EU as of May 1 represents ''an opportunity, not a
threat'' for the countries of the Mercosur (Southern Common Market -
Argentina, Brazil, Paraguay and Uruguay), Argentina's Deputy Foreign
Minister Martín Redrado told IPS.
''Many feared that enlargement would generate direct competition in
products in which the Mercosur countries are most competitive, but that is
not the case,'' he remarked.
''On the contrary, the offer of improved access to the EU markets takes
into account the greater European demand resulting from the expansion,'' the
official underlined.
On Saturday, the population of the EU will balloon from 378 to 453
million people, when Cyprus, the Czech Republic, Estonia, Hungary, Latvia,
Lithuania, Malta, Poland, Slovakia and Slovenia join the bloc.
The immediate effects of the expansion will be small for Brazil, the
biggest member of the Mercosur, because the 10 new EU members ''are not
important markets for this country,'' Marcos Jank, president of the
Brazilian Institute for International Trade Negotiations, commented to IPS.
Besides, the new members of the EU ''are no longer fundamentally
agricultural countries, and the most agricultural ones, like Poland and
Hungary, do not export very much, or their products generally do not compete
with those of Brazil, and the Mercosur,'' agreed Professor of International
Economy Theotonio dos Santos at the Federal Fluminense University in Brazil.
The new countries are interested in joining the EU ''to develop their
industry, services and tourism, not agriculture,'' he said. They have good
universities and scientists, which puts them in a position to offer goods
and services with greater added-value, ''leaving to the Mercosur the
'backwards' activities like farming and traditional industry,'' dos Santos
remarked to IPS.
''The most damaging effect could be caused by the political position that
these countries will assume within the EU, against the liberalisation of
trade within the World Trade Organisation (WTO),'' he said.
''I can't imagine Poland, Hungary or the Czech Republic supporting an
opening of the EU to Mercosur products,'' he said.
Until 1986, Hungary formed part of the Cairns Group of agricultural
exporting countries opposed to farm subsidies and other forms of
protectionism. ''But now they will benefit from the EU subsidies,'' said
Jank.
At the same time, the new members of the European bloc will tend to
assume a more European perspective on foreign policy issues, abandoning
pro-U.S. positions, said dos Santos.
That, he said, will contribute to greater global equilibrium, and to ''an
integration towards the east - Russia, China, India - the overland silk
route, as the fulcrum'' of the global economy.
The expansion coincides with the final stretch of talks between the EU
and Mercosur on a free trade accord, which has been under negotiation since
1995. The negotiators believe the October target will be reached, although
the treaty will not be as ambitious as initially projected.
The 2003 reform of the EU Common Agricultural Policy outlined a timetable
for reducing farm subsidies that developing countries like Brazil and
Argentina criticised as falling short, in the WTO multilateral talks.
But analysts say it looks like the touchy agricultural question that has
stood in the way of progress towards the trade deal is on its way to being
worked out. Europe has indicated a willingness to increase import quotas and
lower tariffs for some Mercosur farm products.
However, according to the report 'Opportunities and Threats Posed by an
EU-Mercosur Accord' by the Argentine Foreign Ministry's Centre for
International Studies, the Mercosur will face competition in some areas from
several east European countries.
Nevertheless, Redrado said an analysis of the productive structure of the
new EU members shows that ''this is more of an opportunity than a threat''
for the Mercosur, which will now have an expanded market for its products,
due to higher levels of demand. ''No Mercosur product will be threatened,''
he maintained.
Argentina currently holds the rotating presidency of the Mercosur.
Next week in Brussels, delegates of the two blocs will each put forth
their offers for improved market access, in an attempt to pave the way for
the signing of the agreement.
EU Agriculture Commissioner Franz Fischler, who travelled to Brazil and
Argentina this week, said at the end of his tour Thursday that the
atmosphere surrounding the negotiations is ''constructive,'' and that he is
''convinced'' that an understanding will be reached by the late October
target date.
Trade between the EU and Mercosur doubled in 10 years, from 20 billion
dollars in 1991 to more than 40 billion in 2001.
The Mercosur is the EU's main trading partner in Latin America, absorbing
more than half of the flow of trade and foreign direct investment from the
European bloc.
The EU is also the main partner of the Mercosur in the industrialised
North. The South American bloc mainly exports farm and food products to the
EU, while importing chemicals, metals, machinery and plastics from Europe.
But the negotiations are not moving along as smoothly as they could, and
time is pressing.
''We are at a disadvantage because the Mercosur presented its offer for
improved market access last week, by the deadline that had been set, but the
EU has not done so yet, although it says it will in Brussels,'' an Argentine
Foreign Ministry official told IPS.
The source, who preferred not to be identified, said that in the view of
the EU, the exchange of proposals for improved market access will involve
much dialogue, and the negotiations on that question could continue until
May 28, when the summit of heads of state and government of Latin America
and the EU takes place in Guadalajara, Mexico.
Mercosur and EU leaders will also meet in Mexico, parallel to the summit,
to smooth out the final obstacles to an accord at the highest political
level, a member of the EU delegation in Argentina said to IPS.
The EU ''has a high level of ambition'' with regards to the agreement,
said Fischler, noting that the bloc's domestic farm subsidies amount to just
70 percent of what it doled out 10 years ago, right before the talks with
the Mercosur began.
He said the opening should include sensitive Mercosur products like beef
and corn, which would be able to enter the European market with lower
tariffs and higher quotas.
But, the commissioner said, the European bloc expects the Mercosur ''to
do its part'' and present an equally ambitious offer.
Redrado said there are areas in which the EU must make greater
concessions, and added that the Mercosur has ''the highest level of
ambition'' and is committed to reaching an agreement by late October.
''The message at the highest political level is that 'where there's a
will there's a way', and in this case the Mercosur wants to reach an accord
and the EU does too, which means we'll be able to find the way to accomplish
that,'' said the deputy foreign minister.
The South American bloc of 224 million people wants the goods it produces
with greater added-value to be granted conditions that will allow them to be
imported by the EU. ''The priority of our trade policy is to generate
employment for our people,'' said Redrado.
*Mario Osava in Brazil contributed to this report.
(END/2004)
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