By Dario Montero
MONTEVIDEO, Jul 4 2000 (IPS)

The Southern Cone Common Market (Mercosur) is upbeat after last week’s summit in Buenos Aires, even though the negotiators were unable to resolve a long-running dispute over the norms governing trade in cars and spare parts.

The presidents of the South American bloc’s member countries agreed to move forward towards common macroeconomic policies, and adopted new social commitments in an atmosphere of optimism due to signs of recovery in Argentina and Brazil, the two largest members of the bloc, which is also comprised of Paraguay and Uruguay.

However, the “relaunch” of Mercosur announced prior to the summit was tarnished by the failure to reach agreement on the touchiest commercial questions, and especially by the postponement, once again, of a final agreement on phasing out the remaining restrictions on trade in cars and parts.

Given the clear indications that the accords would not be reached before the end of Argentine President Fernando de la Rúa’s stint as rotating president of the bloc, Argentina’s negotiators suggested that the leaders sign the long-shelved Mercosur Social Charter.

The document states the presidents’ intention to overcome the problems of poverty and social marginalisation, and is the first declaration of its kind since Mercosur was created nine years ago, and after its leaders have met in 18 summits.

The Social Charter was signed by De la Rúa and his counterparts Fernando Henrique Cardoso of Brazil, Luis González Macchi of Paraguay, and Jorge Batlle of Uruguay, as well as Chilean President Ricardo Lagos and Bolivian Foreign Minister Javier Murillo, whose countries are associates of Mercosur.

“Economic development and regional integration can only be achieved in a context of justice and social equity,” states the document. “Growth is a necessary but not sufficient condition for eradicating poverty and exclusion,” it adds.

Despite the lack of progress on other fronts, the presidents justified the talk of a “relaunch” of the bloc, based on the signing of the Social Charter.

The document indicates “a major shift in our perception of Mercosur, because in the past we only talked about tariffs, and today we are turning our attention to the needs of our people,” said Cardoso, who took up the presidency of the bloc as De la Rúa stepped down.

Agreement on lifting restrictions on trade in cars and spare parts was put off once more, after four days of intense negotiations by the Common Market Group and the Council of ministers of the economy and foreign relations, in which Argentine and Brazilian officials tried to get their partners to accept a bilateral accord their countries recently signed.

At the 11th hour, Paraguay — although it has no car-making industry — torpedoed an agreement that included almost all of Uruguay’s proposals, said Batlle.

Uruguayan car-makers are demanding special duties to allow them to survive despite the enormous differences in size between their country of 3.2 million and Argentina, population 37 million, and Brazil, Latin America’s giant, with a population of over 166 million.

The president of Uruguay’s Chamber of Automobile industrialists, Oscar Ramos, told IPS that “the difficulties remain in place, with no changes whatsoever,” despite the optimistic declarations from Uruguayan government negotiators on their return from Buenos Aires.

Ramos said he preferred not to discuss the supposed gains chalked up by Uruguay until the countries reached a final agreement on trade in cars and parts, which was to go into effect in January this year but has been postponed around 10 times.

Argentine and Brazilian officials said they hoped an understanding would be reached in the next 15 days, before a meeting to be held in Brazil.

The bilateral deal struck by Argentina and Brazil, to remain in effect from Aug 1, 2000 to Dec 31, 2005, will slap a 35 percent duty — the highest allowed by the World Trade Organisation (WTO) — on cars imported from outside the bloc.

The idea underpinning the high tariff is to encourage car- makers to set up shop in the region.

Once the agreement goes into effect, all import quotas will be lifted, and anyone requesting it will be granted a license for importing fully assembled cars from outside Mercosur. The accord also stipulates that vehicles produced within the area must have at least 60 percent regional content.

Uruguay, meanwhile, wants to maintain a 20 percent tariff on cars imported from outside the bloc.

It is also demanding a growing quota for imports on spare parts from outside Mercosur, with a preferential two percent duty. Buenos Aires and Brasilia are willing to grant Montevideo those benefits, to the tune of 70 million dollars a year.

But the two biggest members of Mercosur are afraid that low- duty imports of car parts will lead to the fraudulent use of foreign-made parts as if they were produced within the bloc. And their concerns only increased when Paraguay asked to be granted the same benefits as Uruguay.

According to Brazilian Foreign Minister Luiz Felipe Lampreia, Uruguay is “asking for too much.”

Nevertheless, Batlle said he was satisfied with the results of the summit, and spoke of a “rebirth of Mercosur” based on Argentina and Brazil’s success in overcoming several of their discrepancies, the adoption of joint commitments by the members, and the prospect of Chile becoming a full member.

The Chilean government argues that the bloc should gradually lower its common foreign tariff, which currently averages 20 percent, to bring it closer into line with the Chilean duty, set to shrink from nine to six percent over the next three years.

Montevideo agrees, Batlle told the Uruguayan radio station ‘El Espectador’.

Furthermore, he said, “Cardoso agrees that is the route to take, but clarifies that Brazil cannot do it overnight,” because that would lead to the loss of “millions of jobs.”

Brazilian Economy Minister Pedro Malán told reporters that Argentina and Brazil want Chile to join the bloc as a full member, and that Brasilia will not oppose reductions in subsidies and the common foreign tariff.

Batlle also stressed the approval of new common norms aimed at defending members against imports from outside the bloc which are subsidised in their countries of origin.

The Uruguayan Chamber of Industry concurred in general terms with Batlle’s appraisal of the agreements reached, and highlighted the importance of Uruguay being allowed to continue importing industrial inputs duty-free until 2006.

That measure, which was to expire in January 2001, is the very basis of Uruguayan industry’s ability to compete in the region, the chairman of the Chamber of Industry, Gualberto Rocco, told IPS.

Rocco said he did not understand the position taken by the Paraguayan negotiators, since that country of six million does not produce cars, and only has a tiny spare parts industry.

He said he agreed with Batlle that Mercosur should give top priority to the negotiations on the creation of a Free Trade Area of the Americas (FTAA), while taking a united stance in free trade talks with the Andean Community (made up of Bolivia, Colombia, Ecuador, Peru and Venezuela), Mexico and South Africa.

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