TRADE-MERCOSUR: Britain May Be Door to EU’s Agricultural Market

By Mario Osava Reprint | | Print |

Mario Osava

RIO DE JANEIRO, Aug 2 2001 (IPS) - Hopes are running high in Mercosur (Southern Common Market) that the four-nation bloc will obtain greater access to the European Union’s agricultural market following overtures by British Prime Minister Tony Blair during his Latin American visit.

The EU must overcome its old practice of farm subsidies and trade barriers, which disrupt the economy and hurt developing countries, Blair said during his three-day visit to Brazil. His words were music to the ears of the government and the business community here.

The British leader urged the EU to make “fundamental reforms in our agricultural policy… (Its) financing and budgetary requirements have been driven by an agricultural policy that is well out of date.”

Europe’s heavy farm subsidies prevent “countries like Brazil from gaining the access to our own markets that they deserve,” said Blair.

The EU’s agricultural protectionism is, from Mercosur’s point of view, the main obstacle to achieving a trade accord between the two blocs. Negotiations on the agreement began a month ago in Montevideo when the Europeans presented a proposal for lifting certain trade tariffs.

But the Brazilian negotiators and entrepreneurs consider the EU’s offer for the farming sector too limited because instead of mentioning cuts in subsidies and non-tariff trade barriers it simply proposes expanding its import quotas.

Blair affirmed during his visit that the South American countries of Mercosur (Argentina, Brazil, Paraguay and Uruguay) are allies both in the talks with the EU and in the possible new round of negotiations that the World Trade Organisation (WTO) may launch in November at its ministerial conference in Doha, Qatar.

Britain will be an important partner, whose support is crucial at this time of “foreign trade restructuring” in Brazil, commented President Fernando Henrique Cardoso, evaluating Blair’s visit as “very constructive.”

Farming represents just two percent of the British economy. As a result, the continuation of the EU’s Common Agricultural Policy (CAP), which stipulates heavy subsidies, is a burden – not an advantage – for Britain, in contrast to the role it plays in France.

Because of CAP rules, Brazil’s farm exports of beef, tobacco, grains, fruits and, especially, sugar, suffer heavy losses.

Blair underscored Brazil’s key role in talks between Mercosur and the EU, and potentially at the WTO, the success of which would inject 400 billion dollars more into the world economy.

And a large portion of that sum would benefit developing countries, asserted the British leader.

The objective of Blair’s visit was mainly to discuss trade matters, but his Latin American tour, which continued on to Mexico Thursday and Friday, also included a symbolic gesture of rapprochement with Argentina.

This week, for the first time since the Falklands/Malvinas war of 1982, a British head of government tread on Argentine soil.

Blair met with Cardoso and with Argentina’s President Fernando de la Rúa in the Brazilian city of Foz de Iguazú, crossing the border with De la Rúa to the Argentine city of Puerto Iguazú before heading to Mexico.

The British and Brazilian leaders asserted that supporting Argentina in its efforts to overcome its current economic crisis is crucial for Latin America and for the whole world.

With his brief stop in Argentina, Blair also stressed that the EU’s position is to negotiate with Mercosur as a bloc, and not with its individual countries, though he recognised the leadership role played by Cardoso as head of Mercosur’s largest partner.

The South American bloc is home to more than 200 million people and represents at least 80 percent of South America’s combined gross domestic product (GDP).

The move towards closer trade ties is facilitated by the intellectual and political affinity of Blair and Cardoso. The Brazilian president adheres to the ideological social-democratic current known as the Third Way, which is headed by the British prime minister.

Brazil is moving to the forefront of European diplomacy towards Latin America – largely because of its economic and political weight -, receiving a visit from French Prime Minister Lionel Jospin two months ago, and preparing for Germany’s Gerhard Schroeder in late August.

Within a few months, the EU’s three principal leaders will have passed through Brasilia.

Trade between Brazil and Britain totalled just 2.7 billion dollars last year, with a small surplus on the Brazilian side. In addition to expanding bilateral commerce, Cardoso made an appeal for more direct investment from Britain.

British capital in Brazil ranks a modest 14th place, far surpassed by flows coming from other European countries, particularly, Germany, Spain, France and Portugal.