LATIN AMERICA: EU Gives the Go-Ahead for Trade Talks

By Mario Osava Reprint | | Print |

Mario Osava

RIO DE JANEIRO, Jun 22 1999 (IPS) - Diplomatic success was assured for next week’s Rio Summit when the European Union (EU) resolved to negotiate trade issues with the Southern Common Market (Mercosur) and Chile – but the talks do not guarantee that the two trade blocs will reach an agreement.

The hesitation of some countries, most notably France, to agree to open their agricultural markets was only overcome by the strong pressure tactics of Germany and Mercosur.

The Latin American-Caribbean-European Union Summit, the first meeting between the three regions, will take place June 28 and 29 in Rio de Janeiro.

This week’s mandate for negotiations set July 2001 as the date to begin talks – one year later than the originally proposed start date. The EU and Mercosur, which includes Argentina, Brasil, Paraguay and Uruguay – with Chile as an associate member – plan to negotiate reduced trade tariffs.

France would rather postpone the talks until 2003, stating it would be benefit negotiations to wait until the conclusion of the Millenium Round of talks of the World Trade Organisation (WTO), where international agricultural trade will be a central point on the agenda.

For the Brazilian government, France’s agricultural concession was a great triumph. The decision made by the EU’s Ministerial Council also went beyond Brasilia’s expectations, as officials there had been willing to begin negotiations, without dates set for its conclusion, in order to save the Rio Summit.

“We are closer than ever to reaching an understanding” for negotiations, declared Brazil’s Foreign Minister, Luiz Felipe Lampreia.

The approval of the mandate was itself one of our goals for the Rio Summit, stated Celso Lafer, Minister of Development, Industry and Trade, and former ambassador to the WTO.

Without the EU’s mandate, predictions for the summit’s failure were inevitable, even though the meeting involves all of Latin America and the Caribbean, not just Mercosur, and is expected to cover a variety of issues – from politics to culture and education.

The EU decision was approved with some conditions: EU negotiations with Mercosur and Chile “will take into account the results of the Millenium Round of the WTO” as well as the evolution of the Free Trade Area of the Americas (FTAA).

With the Millenium Round beginning in November and not expected to conclude until 2003, and the FTAA expected to finalise in 2005, no date has been set for a trade liberalisation agreement between the EU and Mercosur and Chile.

Brazil’s diplomats want EU negotations to occur simultaneously with the their talks with the United States. They want to keep U.S. leadership balanced in the integration of the Americas, while maintaining equilibrium in Brazil’s foreign relations.

Brazil is attempting to be a country with universal relations, with trade well-distributed throughout all regions, while also staying outside the circle of U.S. hegemony.

Last year, 29 percent of Brazil’s exports went to the EU, 20 percent to the United States, 17 percent to Mercosur members, and 11 percent to other countries of the Americas.

Other parts of the world took in the remaining 23 percent, according to Brazil’s National Industrial Confederation (CNI). The portion of imports from the various regions is nearly the same as exports to those areas.

But Brazil, as well as the rest of Mercosur, is also anxious to revise its trade relations with Europe in order to correct the large imbalance produced by trade expansion over the last decade.

Brazil’s imports from the EU tripled between 1993 and 1998 (from 5.5 billion US dollars to 16.8 billion), a 203.6 percent increase, according to the CNI.

Exports over the same period grew just 48 percent. The 1993 trade surplus of 4.4 billion dollars became a deficit of 2.1 billion by 1998.

The devaluation of Brazil’s currency in January of this year was expected to change the export-import picture, but the country’s competitive products, such as sugar, beef, chicken, instant coffee and orange juice, face tariff and health regulation obstacles in the EU.

In an attempt to deal with these barriers, Mercosur’s Economic and Social Consultative Forum, which brought 41 members of the business and trade union sectors together on Tuesday in Rio, called for an immediate start of trade negotiations with the EU.

We cannot wait until 2005 for Europe to remove its protectionist measures, stated Renato Sghezio, president of the Forum.

The Brazilian economist Celso Furtado, former minister of Planning and Culture, is sceptical about the chances of a trade agreement between the EU and Mercosur.

He does not think France will open its agricultural markets to Mercosur. For them, “it would be like giving up their national identity,” Furtado argued.