TRADE: Negotiations Redefine North-South Relations

By Mario Osava Reprint | | Print |

Commentary Mario Osava

RIO DE JANEIRO, Jul 1 1999 (IPS) - Negotiations for the Free Trade Area of the Americas (FTAA) and between the Southern Common Market (Mercosur) and the European Union (EU) have revised North-South relations.

Current dialogue tends to be horizontal, among equals, unlike past relations between the “industrialised North” and the “developing South.”

At the Latin American and Caribbean-European Union Summit in Rio de Janeiro on Monday and Tuesday, Europe found itself on the defensive on at least two issues.

Agricultural protectionism, the most controversial topic, prompted Mercosur countries (Argentina, Brazil, Paraguay and Uruguay) to maintain pressure on the EU, forcing the bloc to resolve internal dissent before opening trade negotiations.

It appeared that France was the greatest obstacle to reaching an agreement. French president Jacques Chirac reacted to charges of European protectionism saying that it never existed and “is a myth.” He argued that his country has a deficit of some 1.4 billion dollars in agricultural trade with Argentina and Brazil.

When Brazil’s president, Fernando Henrique Cardoso, was asked if it was ‘fantasy’ that Mercosur was losing seven billion dollars in exports per year due to EU trade barriers and subsidies, he responded, “The numbers are no myth.”

Cardoso insisted throughout the summit that the industrialised North “reciprocate” by opening their markets to developing countries, an allusion to the difficulties Mercosur products have in gaining access to the European market.

“Protectionism – whether open or hidden, discrimination, unilateralism and voracious market speculation, all contribute to weakened economic relations, to the detriment of all,” said Cardoso in his speech that opened the meeting between 48 heads of state from Europe, Latin America and the Caribbean.

Chirac attempted to remove France from the defence, accused of being the primary defender of agricultural subsidies and trade barriers in the EU. He counterattacked by demanding an end to “tax havens” in the Caribbean, which allegedly bring in organised crime money, especially from drug trafficking.

Hubert Ingraham, prime minister of the Bahamas, responded that the banks operating in the Caribbean islands are subsidiaries of institutions based in the countries of the industrialised North, “many of which are French,” he added.

European nations also were put on the defensive when it came to reaffirming the United Nations principles of non-intervention, equality among States and self-determination of the people, “as a basis for relations between the two regions.”

In addition to their resistance to including the principles in the Rio de Janeiro Declaration, the European countries that are members of the North Atlantic Treaty Organisation (NATO) were severely criticised by Cuban president Fidel Castro for the bombings in Yugoslavia.

In the past, the countries of the South complained about the “deteriorating terms of trade” when explaining their “underdevelopment” and injustices in international relations.

Now, however, the South has taken the offensive in attacking the subsidies that restrict EU and US markets. The restrictions create adverse trade conditons in other regions as well, and depress international prices of products that are important to the South’s economies and social conditions.

Sugar cane, for example, is a source of employment for millions of people in Latin America, the Caribbean, Africa and Asia. It is also more easily grown and more cheaply processed than Europe’s sugar beets.

But sugar is a “sensitive” product. Mercosur will find it difficult to gain free access to the European market with sugar as well as beef, acknowledged Manuel Marin, vice-president of the European Commission.

In this battle, Mercosur and the rest of Latin America count on their allies in the industrialised North.

The German business community openly confesses the EU’s irrationality in spending tens of billions of dollars on subsidising farmers who represent less than five percent of Europe’s population.

In the FTAA trade negotiations, the Northern industrialised power is the United States, which has its own trade barriers because the US Congress will not ratify trade agreements if it cannot veto certain points of the accords later, in an attempt to maintain protection for certain sectors.

Negotiations among equals require that countries, “upon asking for open markets in one area, be willing to open theirs in other sectors,” said Mexico’s president, Ernesto Zedillo.

Mexico is an experienced negotiator with the industrialised North. It has been a member of the North American Free Trade Agreement (NAFTA) for the last four years and will conclude a similar agreement with the EU by the end of 2000.

But Mexico is a unique case. Its extensive border with the United States means that 80 percent of Mexico’s foreign trade is with its northern neighbour. Its limited trade with Europe has not met with agricultural trade barriers.

Mercosur, however, maintains that it has established a new North- South relationship, despite the asymmetries that came to light during the Rio Summit.

The enormous differences in political and economic development in Latin America and the Caribbean and the social disparities within each country continue to be the region’s Achilles heel.

In many cases, requests for developmental aid come before demands for more equitable conditions for competitive trade.