TRADE: Mercosur Closer to EU, While FTAA Talks Falter

By Marcela Valente Reprint | | Print |

Marcela Valente

BUENOS AIRES, Mar 12 2004 (IPS) - The Free Trade Area of the Americas (FTAA) is slated to take effect in less than 10 months, but this week in Buenos Aires it ran into more stumbling blocks. In contrast, the free trade process involving Mercosur (Southern Common Market) and the European Union, facing no deadlines, continues to advance.

Meetings on these two trade projects took place this week in the Argentine capital – and produced disparate results. Both revolved around an issue that has become a classic in these encounters: Latin America’s demand that industrialised countries eliminate subsidies for the production and export of agricultural products.

Trade representatives from 12 of the 34 FTAA countries tried unsuccessfully during a "reduced roundtable" to unblock pending issues before the upcoming ministerial meet, which was to take place next week in Puebla, Mexico, but has been postponed until April.

In another conference room, delegates from the EU and from Mercosur (Argentina, Brazil, Uruguay and Paraguay) agreed to put formal proposals on the table within the month for improving market access between the two regions. Their aim is to reach an accord in May, in time for the EU and Latin American summit in the central Mexican city of Guadalajara.

As far as the possibility that progress on farm trade between Mercosur and the EU could influence the FTAA negotiations, Argentina’s deputy foreign minister, Martín Redrado, who currently chairs the South American bloc, hesitated to make comparisons between the two sets of talks.

"With the EU we are seeking an in-depth integration process in terms of politics, cooperation and trade," said Redrado, playing down the failure of the negotiations involving the FTAA delegates, who made no progress even on proposals for a very limited agreement.

The United States, the driving force behind the hemisphere-wide FTAA integration process, refused to move towards eliminating its farm export credits and was unwilling to establish compensation mechanisms for its future partners for the protectionism of its market.

For their part, the Latin Americans did not give an inch on the request that they treat U.S. companies participating in bidding or privatisations in the region as equals of local companies.

The Mercosur-EU talks, meanwhile, saw advances in key conceptual areas.

"We want to generate substantial proposals in all areas by Apr. 15," summarised Redrado as concluded the meeting Friday with EU delegates after a week of work that both sides described as fruitful.

Karl Falkenberg, director of the European Commission’s trade office, said the EU is strongly committed to finding a successful solution and to assuming political risks. He said he hopes the same of Mercosur as a means to generate "ambitious proposals".

Without directly mentioning the thorny issue of agricultural trade access to the European market, the negotiators said they are confident that this time they will find a way to neutralise the effects of the EU farm subsidies.

The two regions had exchanged proposals in 2001, but those talks got bogged down as a result of the EU’s refusal to liberalise its agricultural trade, an ongoing point of friction with the Mercosur, whose members stand out in the world market as producers of farm commodities and raw materials.

This week, the delegates from the two blocs worked in a climate of "cautious optimism" and frank exchange that was maintained through to the end, when the parties pledged to present their "improved proposals" in a month, said Falkenberg.

The EU and Mercosur signed a framework agreement in 1995 to negotiate a free trade treaty in a period originally set at 10 years, but later decided to eliminate the deadline to facilitate an understanding that would satisfy both sides.

Trade between the 15-member EU and the four Mercosur partners reaches 50 billion dollars annually.

The negotiators’ focus in Buenos Aires was not trade volumes but rather mechanisms for agricultural trade, health barriers, rules of origin, customs rules, criteria for the reciprocal sales of services, government procurement, a structure for investment and intellectual property matters, among others.

Redrado noted that this time Mercosur resolved to negotiate access to markets in all areas, taking into consideration different trade modalities in order to grant preferences based on general agreements between the two blocs.

"We want a balanced result in all areas," said Falkenberg as the meeting came to a close. Negotiations will continue informally until Apr. 15, when the EU and Mercosur are to determine whether they have found a path forward that they can both agree on.