TRADE: FTAA the Key for Mercosur-EU Accord

By Mario Osava Reprint | | Print |

Mario Osava

RIO DE JANEIRO, Oct 31 2003 (IPS) - November will be a decisive month for negotiating the Free Trade Area of the Americas (FTAA) and an agreement between Mercosur and the European Union, as the latter will advance only if the former does, say experts and negotiators alike.

The mood at the Mercosur-EU Business Forum, which met this week in Brasilia, reflected a lack of enthusiasm for bilateral trade talks.

There were fewer business leaders taking part in the forum than expected, and the meeting’s Brasilia Declaration made recommendations that are hardly considered viable under current circumstances.

The EU will only reactivate its efforts with Mercosur (Southern Common Market – Argentina, Brazil, Paraguay and Uruguay) if the FTAA talks overcome the “paralysis” that has resulted from disputes between Brazil and the United States, businessman Antonio Donizeti Beraldo told IPS.

Brazil’s disinterest in promoting the hemisphere-wide agreement is also contributing to this stagnation, he said.

Perhaps the November ministerial meetings will be able to drive both processes, which share the goal of implementing free trade agreements in 2005, though few believe they can be achieved in that short period, commented Donizeti, head of international trade affairs for the Brazilian Confederation of Agriculture and Livestock (CNA).

Brazil’s foreign minister Celso Amorim is to meet in Washington on Nov. 7 with U.S. trade representative Robert Zoellick, on the eve of a gathering of the hemisphere’s chief negotiators for the FTAA, a process co-chaired by Brazil and the United States.

This political intervention is a bid to ensure results at the ministerial conference Nov. 20-21 in Miami, to be attended by the 34 countries involved in the FTAA – all nations of the western hemisphere except Cuba.

A week earlier, on Nov. 12, ministers from the 15 EU countries and the four Mercosur members are to meet in Brussels.

In their search for a positive spin for that meeting, the business leaders at the Brasilia forum recommended that the EU expand the scope of its proposals as a means to jump-start trade negotiations.

The European bloc is being asked to open up its agricultural markets, in other words, to remove trade barriers and reduce domestic farm subsidies. Mercosur, meanwhile, is to eliminate obstacles for government procurement and trade in services.

Karl Falkenberg, chief negotiator of the European Commission, the EU’s executive body, announced during the Business Forum that the European bloc is willing to give Mercosur’s farm products better access to its markets.

This would take the form of increased import quotas for what are considered “delicate” products from Mercosur, which are normally hit with high tariffs and other insurmountable obstacles if they exceed the established quota.

In compensation, Falkenberg demanded concessions that allow greater participation by European companies in the Mercosur markets for services and for government procurement.

Donizeti says the expansion of quotas alone is insufficient and marks a weakening of the willingness expressed by the EU in previous meetings. Furthermore, the proposal for the farm sector “is far inferior” to the one the United States made in the FTAA, he said.

The U.S. offer entails the possibility of cutting tariffs on all agricultural products, reducing both “ad valorem” tariffs (a percentage above price) and specific tariffs, in general fixed sums covered per imported tonne.

The EU is not preparing to reduce or abolish those specific tariffs, which in the case of beef reach 3,000 dollars a tonne, and with the “ad valorem” constitute a 150-percent tax on the product, making trade a bad business, said Donizeti.

Furthermore, contrary to what is reported in Brazil, Washington is getting ready to revise its farm subsidy regimen, and considering eliminating them for exports to FTAA countries, while looking for ways to neutralise the effects of its support for U.S. farmers on trade in the hemisphere, says the CNA leader.

Luiz Macedo Soares, head of South American affairs at the Brazilian foreign ministry, agrees that European resistance to opening its agricultural market is “worse” than that of the United States.

U.S. farm protectionism “is more recent, it doesn’t have a long tradition and is restricted to certain products,” such as orange juice and sugar, important Brazilian products, but less of a problem than European protectionism, Antonio Buainain, an agricultural economist from the University of Campinas, near Sao Paulo, told IPS.

The more serious problem is subsidised exports. The United States needs to place its surplus agricultural production – generated by its farm subsidy policy – on the foreign market, and that affects competitors in other countries, Buainain said.

One example is the cotton that the United States exported, driving down international prices and leaving millions of African farmers in misery, he said.

Mercosur considers it essential to obtain greater access for its farm products on the markets of the United States and EU. The collapse of multilateral trade talks at the World Trade Organisation ministerial meeting in Cancun last month pushed that goal farther out of reach.

But the expectations in the run-up to the Mercosur-EU ministerial meet in November are low. Among other reasons, because the European bloc has not yet comprehended the role of the G-20, said Donizeti.

The Group of 20 developing countries was formed in the weeks prior to the Cancun meet and is led by Brazil, China, India and South Africa. The G-20 proved strong enough to block the United States and EU from imposing their joint agricultural trade policy on the rest of the WTO members at that conference.