TRADE: Mercosur Heads to Latin America- EU Summit with Ultimatum

By Marcela Valente Reprint | | Print |

Marcela Valente

BUENOS AIRES, Jun 18 1999 (IPS) - The Southern Common Market (Mercosur) has hinted that it will adopt its own protectionist measures if, as the bloc assumes, the European Union (EU) fails to remove its farm subsidies.

South America’s largest trade bloc would also respond to continued EU resistance to negotiate agricultural issues with renewed interest in the future Free Trade Area of the Americas (FTAA), which the United States is hotly pursuing to the chagrin of Europe, Raul Roccatagliata, a private sector trade negotiator, told IPS.

Argentina’s position, backed by farmers in Brazil, was coordinated by agribusiness leaders and the Secretariat of Agriculture with a view to the Jun 28-29 summit of heads of state and government from Latin America, the Caribbean and the EU in Rio de Janeiro.

Roccatagliata, head of the Rural Association, which groups Argentina’s big farmers and ranchers, said “the message we as Mercosur want to send in Rio is that, given the resurgence of subsidies in the EU, we are looking kindly on Brazil’s protectionist tradition as well as negotiations with the United States on the FTAA.”

The Rio de Janeiro summit was convoked by France, the very country that today is holding up the start of negotiations for a free trade area between the two blocs by refusing to discuss the elimination of subsidies for agricultural production and exports.

France’s unyielding position, partly backed by Great Britain and Ireland, threatens to turn the summit into a flop.

The presidents of the Mercosur nations – Argentina, Brazil, Paraguay and Uruguay, which account for 80 percent of South America’s combined gross domestic product – have warned that the summit would be little more than a social gathering if farming issues are not addressed.

“Agriculture constitutes an essential part of our economies, and thus the negotiations must entail the liberalisation of all trade without exceptions,” stated a declaration released by the Mercosur presidents at a meeting this week in Paraguay.

At the last European summit, French President Jacques Chirac, a former agriculture minister, opposed the start of negotiations between the EU and Mercosur before the year 2000, thus blocking a consensus for launching talks before the year-end.

The countries grouped in the Organisation for Economic Cooperation and Development (OECD) – which includes the 15 EU member nations – spent 336 billion dollars on farm subsidies in 1997.

That policy hurts the economies of Mercosur, which do not resort to subsidies and are more efficient in producing foodstuffs, their leading exports, Roccatagliata pointed out.

A year ago, after a meeting between Mercosur and EU agriculture ministers to discuss the creation of a free trade area between the two blocs, European negotiators proposed a gradual phasing out of subsidies, to begin in the year 2005 and to be completed by 2020.

That position was even rejected at the time by European representatives such as Spain’s Manuel Marin, the vice-president of the EU, who is in charge of the bloc’s relations with Latin America.

And in an interview published Friday by the Spanish daily ‘El Pais’, Marin stressed that one of the main problems that should be resolved by the EU prior to the Rio de Janeiro summit was the question of talks with Mercosur on a free trade area.

On Monday, the 15 EU countries are to decide whether to approve a mandate for negotiations to start before Dec 1, 2000, as advocated by the South American bloc, or to be postponed until 2002, as France is pushing for.

“If the 15 EU members finally decide to start talks with Mercosur, the biggest beneficiaries will be, in the long-term, the Europeans,” Marin argued.

He pointed out that the EU was the second largest foreign investor in Latin America – and the top investor in Mercosur – the region’s second biggest trading partner after the United States, and the leading donor of non-repayable aid.

“If we do not know how to take advantage of the space and opportunities offered through cooperation with Latin American countries, others undoubtedly will,” he warned, in an apparent allusion to the United States.

Marin called for “concrete results,” stressing that the summit must end with something more than “a family photo” of the presidents.

Mercosur wants negotiations on a free trade area to be completed by the year 2005, and is opposed to any talks that fail to address the question of subsidies.

The collapse of farm commodity prices last year highlighted the negative impact of protectionism – especially Europe’s – on Mercosur.

Argentinian Agriculture Secretary Ricardo Novo said farm subsidies “are not the only cause, but are the most important reason for the crisis in the countryside” – a crisis that “will be cyclical” in this Southern Cone country if the EU fails to lift its subsidies.

Secretary of Industry Alieto Guadagni agreed that given the magnitude of the crisis sweeping the Argentinian countryside, “it is imperative today, as never before, to promote on all fronts a final fight against agricultural subsidies” in global trade.

European aid to farmers not only curbs the flow of Mercosur products into Europe, but distorts competition in third party markets as well, he pointed out.

Sugar and chickens from Brazil, two products in which South America’s giant is the world leader, run up against the same products entering Asia and the Middle East from the EU, at subsidised prices.

Subsidies also have had an impact on the trade balance between the two blocs. In the past seven years, EU exports to Mercosur climbed 330 percent, while the South American bloc’s sales to Europe rose just 35 percent.

Mercosur members believe it is necessary not only to defend liberalisation at the Rio de Janeiro summit, but also in the Millenium Round of World Trade Organisation (WTO) talks, which start in November in the U.S. city of Seattle, Washington.

Roccatagliata said there were “short-circuits” within the EU because many of the governments considered farmers’ share of the budget excessive, while even France, at several bilateral meetings, had promised to review its intransigent stance.

But he added that there were no great expectations for the Rio de Janeiro meet. Nor was he confident that next Monday’s gathering of EU foreign ministers in Cologne, Germany could save the summit from turning into a fiasco.

The only hope for farmers lies in the advances that could be seen in a private sector meeting to be held parallel to the summit in Brazil, said Roccatagliata. “They’ll have to give in on something,” he maintained, referring to the European bloc.

Governments preferred not to announce their positions – on timeframes for the lifting of tariffs, for example – in order not to reveal their negotiating strategies vis-a-vis the coming round of WTO trade talks, he explained.

Roccatagliata added that in late August the ministers of economy and trade of the 15 countries of the Group of Cairns, which do not subsidise their agricultural sectors, would meet in Mar del Plata, Argentina to hash out a common position to take to Seattle.