TRADE-MERCOSUR/EU: New Bout of Talks on Liberalisation

By Marcela Valente Reprint | | Print |

Marcela Valente

BUENOS AIRES, Mar 28 2000 (IPS) - Representatives of South America’s largest trade bloc, Mercosur, and the European Union (EU) meet next week in the Argentine capital to hammer out a blueprint for negotiations on the liberalisation of trade between the two blocs.

EU delegate to Argentina Vicente Alloco explained that the officials meeting in Buenos Aires Apr 7-8 would organise three working groups and their respective sub-groups, decide on the frequency with which meetings will be held – three are scheduled this year – and outline the basic structure of the future talks.

Mercosur (Southern Common Market, which accounts for almost 80 percent of South America’s combined Gross Domestic Product) and the EU had initially projected the creation of a free trade area by 2005.

But at the June 1999 Latin American-European summit in Rio de Janeiro, that deadline was lifted, and the concept of a free trade zone was replaced by the goal of “a liberalisation of trade and services.”

Trade between the two blocs amounted to 49.5 billion dollars in 1998. As the source of 33 percent of goods imported by Mercosur and the client for 30 percent of its exports, the EU is the South American bloc’s chief trading partner. It is also the source of millions of dollars in direct investment in the Southern Cone region.

But the balance of trade is favourable to the EU and the terms of trade are unequal. Europe mainly purchases farm products from Mercosur, while selling it industrial products and services.

After the Rio de Janeiro summit, the EU-Mercosur Cooperation Council met in November in Brussels. But it failed to reach agreement on the issues to be discussed by the two blocs or the timeframes to be followed, due to the pressure felt from the approaching World Trade Organisation (WTO) ministerial conference, held in early December in the US city of Seattle, Washington.

The WTO’s failure to launch a new round of multilateral talks has slowed down the negotiations between the European and South American blocs. “They are parallel processes, but nothing can be agreed until everything is agreed – which means the two negotiation processes are linked,” Alloco told a news briefing here this week.

EU subsidies to farmers are the main hurdle. The members of Mercosur – Argentina, Brazil, Uruguay and Paraguay – want the EU to remove subsidies for agricultural production and exports. But that is the European bloc’s “Achilles’ heel,” according to Alloco.

Next week’s meeting kicks off the first of two phases of negotiations. In Buenos Aires, officials will begin to discuss only non-tariff issues such as phytosanitary/sanitary health barriers, technical and quality standards, and transgenic crops, and set up three working groups.

The second phase, involving discussions of duties, is to get underway in July 2001.

“At this meeting we are not going to get involved in in-depth discussions on the issues. We are going to define the structure the negotiations are to follow,” the European delegate explained, admitting that the question of farm subsidies was a thorny one for the EU.

But, he said, since the last round of multilateral talks, the Uruguay Round, the EU has considerably reduced the guaranteed prices paid to farmers for their output. He added that in the future, that support would be made part of the income of farmers, in order to avoid the problem of overstimulating the planting of certain crops, and the consequent market gluts.

Alloco referred to the concept of “multifunctionality” – a theory advocated by Europe in the debates on protectionism. The idea is that agriculture serves a number of functions, such as providing jobs and conserving the environment, landscape, and social structures.

With respect to non-tariff barriers to trade, the official added that technical negotiations were well underway with Argentina – but not with the bloc as a whole – and that the EU would sign an agreement this year on the mutual recognition of phytosanitary/sanitary standards with Mercosur’s second largest partner.

“The Buenos Aires meeting should not run into any difficulties,” said the ambassador, in response to questions raised by foreign correspondents on the likelihood that the controversial issue of farm subsidies would be debated at the early April meeting.

In the run-up to the meeting, EU-Argentina cooperation will be discussed on Apr 5, and EU-Mercosur cooperation on Apr 6.

Despite the fact that the Seattle fiasco led to a waning of interest in a free trade zone between the two blocs, Alloco stressed that the EU wished to continue talks with Mercosur as part of its strategy to forge close ties with the world’s fastest- growing regions.

The official was also asked about whether the ongoing negotiations towards the creation of a Free Trade Area of the Americas (FTAA), an initiative pushed by the United States, could spur faster progress in discussions between the EU and Mercosur.

“If liberalisation is carried out in accordance with the WTO’s free trade rules, we will look kindly on the FTAA,” Alloco replied. “But if it merely serves to increase liberalisation from the outside in, and protectionism towards the rest of the world, then we will not be very happy with the process,” he warned.