MERCOSUR-EU: War in Iraq Favours Trade Accord

By Mario Osava Reprint | | Print |

Mario Osava

RIO DE JANEIRO, Apr 14 2003 (IPS) - The new global context emerging from the war in Iraq will tend to benefit a trade agreement between Mercosur (Southern Cone Common Market) and the European Union (EU), say experts and business leaders in Brazil, the largest of the South American bloc’s partners.

Today there is a "clear propensity among the Brazilian elite in favour of an accord with the EU," Amancio Nunes Oliveira, an international relations expert with the University of Sao Paulo, told IPS.

His observation is backed by the results of an Internet survey conducted by the Brazilian Centre for International Relations (CEBRI), a Rio-based think tank.

CEBRI brings together former ministers, business leaders, diplomats and academics to engage in debate on the pressing issues of Brazilian foreign affairs.

In the poll, 43.3 percent of the respondents, as of Apr. 12, said the most important trade negotiations for the country were those between Mercosur and the EU, while 22.1 percent said the priority should be internal Mercosur talks with partners Argentina, Paraguay and Uruguay.

Next in line were the negotiations related to the Free Trade Area of the Americas (FTAA), cited by 13.8 percent of poll respondents, and the World Trade Organisation (WTO), with 13.0 percent.

According to the profile of visitors to the CEBRI web page, it is assumed that survey participants are well informed and interested in foreign policy.

From another perspective, it is believed that the EU needs more alliances for geopolitical reasons, such as the recent aggressive stance of the United States, and has sent signals indicating interest in closer ties with Mercosur – including willingness to make trade concessions.

"Brazil has the responsibility to take advantage of the opportunity and test whether the EU’s willingness will extend to the agricultural sector," Mario Marconini, CEBRI executive director and Brazil’s former secretary of foreign trade, said in a conversation with IPS.

The deterioration of U.S. relations with Germany and France, related to the two European countries’ opposition to war in Iraq, has hurt multilateral negotiations under the auspices of the WTO. The talks were already bogged down by so-far insurmountable obstacles in farm trade, largely due to the EU’s protectionist policies and subsidies.

Washington’s unilateralist stance – taken to the extreme with the invasion of Iraq without the authorisation of the U.N. Security Council – has only fuelled FTAA-related uncertainties in Latin America, a region in which most countries opposed the war.

"It’s difficult to know how to confront unilateralism," especially because the U.S. trade policy, for electoral reasons, tends to be very receptive to pressure from groups at home that demand protection, noted Marconini.

The war is another factor contributing to the slow-down in the negotiations of the WTO Doha Round, also known as the Development Round, and of the FTAA, which is slated to enter into force after 2005, noted the University of Sao Paulo’s Oliveira during a recent seminar for business leaders and industrialists in Rio de Janeiro.

But nothing is certain in today’s slippery international context, acknowledge both Marconini and Oliveira.

Predictions about Mercosur-EU relations vary among Brazilian negotiators, with some forecasting progress, and others pointing to inevitable backsliding, in pace with the WTO or the FTAA, and agreements achieved only after 2007, a diplomat with extensive experience on Brazilian trade negotiating teams, told IPS, speaking on condition of anonymity.

José Alfredo Graça Lima, Brazil’s ambassador to the EU, says, for example, that a trade agreement with that bloc would be possible next year, in which the Europeans would expand Mercosur’s access to their farm markets, a condition the South Americans consider indispensable.

Making a farm trade concession to the four-country bloc would be much less traumatic for the EU than the reforms demanded in the context of the WTO negotiations, which involve the organisation’s 146 member countries.

But that strategy, which Mercosur suggested in late March to EU Trade Commissioner Pascal Lamy, carries with it the risk that the South American bloc would distance itself from the Group of Cairns, 18 countries that are actively opposed to farm subsidies, Argentina, Brazil, Paraguay and Uruguay among them, pointed out the diplomat.

But ruptures of that kind are highly unusual in Brazil’s diplomatic policy line, added the source.

Furthermore, there is nothing to ensure that the EU is truly willing to open its markets, given the fact that the bloc so far does not even admit that it is protectionist, said Marconini.

He wonders especially if France’s President Jacques Chirac is really in favour of such an opening, in spite of his country’s agreement with Brazil on the Iraq question.

Argentina’s trade secretary Martín Redrado said in Europe last week that if the FTAA takes shape before an EU-Mercosur accord, the Europeans could lose a third of their participation in the Argentine and Brazilian markets. Europe today represents 30 percent of the imports of both countries, according to official figures.

Negotiations between the South American and European blocs have been progressing since last year, when the two sides set a timeline to wrap up talks in 2004. In February, Mercosur expanded its proposal to the EU, calling for the gradual lifting of tariffs on 83.5 percent of the categories in bilateral trade.

The EU made an apparently more generous offer, to liberalise 91 percent of the volume imported from Mercosur, and the immediate repeal of tariffs on 62 percent of the trade flow once the agreement enters into force.

However, the nine percent excluded from the EU proposal includes the products that most interest the Mercosur countries, such as sugar and beef.