Economy & Trade, Europe, Headlines, Latin America & the Caribbean

TRADE: EU Woos Latin America over Subsidies

Stefania Bianchi

BRUSSELS, Apr 15 2004 (IPS) - The EU is reportedly planning a deal with a Latin American trading bloc this week to win support for agricultural subsidies.

The European Union (EU) is expected to offer trade concessions to a group of South American countries if they stop opposing the bloc’s extensive farm subsidies under its Common Agricultural Policy (CAP), according to local reports quoting official sources.

The EU and the Mercosur group of countries comprising Brazil, Argentina, Paraguay and Uruguay are expected to take the first steps towards a trade deal Friday (Apr. 16).

The two sides are expected to present improved offers on trade in products such as beef, sugar and cereals under a deal that has been under discussion for more than four years. The proposed agreement offers preferential trade concessions to Argentina, Brazil, Paraguay and Uruguay.

These countries have been among the strongest opponents of the EU in the Doha Development Round, which aims to secure international agreements in such critical areas as agricultural trade, trade in services and industrial tariffs.

If this deal goes ahead then the Mercosur countries would be more willing to negotiate with the EU in the Doha Round of trade talks.

The EU is expected to offer to enlarge quotas that limit import of the politically most sensitive products from these countries such as beef, sugar and dairy products. These staple products of developing countries have caused the most controversy in the past.

The British newspaper ‘The Financial Times’ says Brussels is expected to "go further" if Mercosur members agree not to press it to liberalise agriculture in the Doha round – to lift or reduce subsidies, that is. Otherwise, it says the EU would deny the Mercosur countries additional concessions on preferential terms.

The EU has not disclosed the value of the initial "down payment" it plans to offer Mercosur. But ‘The Financial Times’ reports that it "may amount to about a third of the total farm-trade concessions" it gives the Latin American trade bloc.

Mercosur negotiators have indicated that they are willing to discuss the proposals, which have already been outlined to them. But they say they would need to see the full details before deciding whether to accept them.

If the EU offer is accepted, it could split the Cairns Group of agricultural exporters – Argentina, Australia, Bolivia, Brazil, Canada, Chile, Colombia, Costa Rica, Guatemala, Indonesia, Malaysia, New Zealand, Paraguay, the Philippines, South Africa, Thailand and Uruguay – as well as the Group of 20 (G20) developing countries which was formed after the collapse of the Doha Round in Cancun last September.

A Brazilian diplomat told the Agence France Presse news agency Wednesday (Apr. 14) that an EU-Mercosur agreement could strengthen relations between the two regions.

"It will be an incentive for Mercosur not to push the EU hard in the World Trade Organisation," said Jose Alfredo Graca Lima, Brazil’s ambassador to the EU. "It would make Mercosur an ally, not an adversary."

But Lima stressed that an accord between the EU and Mercosur "will not tie the hands of G20 negotiators."

The agreement due Friday could form an important element in a larger trade agreement that the EU and Mercosur hope to conclude by October this year.

After Friday’s meeting Mercosur and EU delegations will hold a further round of talks in Brussels early May to assess the proposals presented. This will be followed by a meeting at the end of May in Guadalajara, Mexico, when an EU- Latin America summit will assess progress before a final agreement is negotiated in October.

EU trade commissioner for trade Pascal Lamy said last month that the May summit would also advance the Doha Round of negotiations.

"In Guadalajara we want to send a clear signal that the EU and Latin America- Caribbean are working together to push the WTO Doha Round of trade talks while we continue strengthening our trade and economic relations," Lamy said.

"The summit could also ring the bell for the last lap of the EU-Mercosur negotiations if both parties are ready to run the extra mile," he added.

The negotiations under the World Trade Organisation (WTO) were launched in Doha in Qatar in 2001. They are scheduled to conclude this year, but have fallen months behind schedule.

The prime demand by developing countries in these negotiations is for the West to drop subsidies and open up its markets.

Trade talks between the EU and Mercosur started in November 1999 had aimed to create a free trade zone by 2003. But differences came up over subsidies and tariffs involving agricultural produce.

The latest offer from the EU is expected to indicate for the first time Friday how far the EU is prepared to lower its farm trade barriers.

The deal would guarantee Mercosur exporters better access to the EU market. In return, the EU is looking for better access in South American markets for services, industrial goods and government procurement for EU suppliers.

The EU is Latin America’s second biggest trading partner.

Between 1990 and 2002 EU imports from Latin America increased from 31.9 billion dollars (26.7 billion euros) to 64.2 billion dollars (53.7 billion euros), and exports to the region rose from 20.4 billion dollars (17.1 billion euros) to 68.7 billion dollars (57.5 billion euros).