EU-MERCOSUR: Hopes for Trade Deal Dashed – for Now

By Mario de Queiroz Reprint | | Print |

Mario de Queiroz

LISBON, Oct 21 2004 (IPS) - It took just an eight-hour meeting in the Portuguese capital and a 25-line communique to destroy the last remaining vestiges of hope, after five years of efforts, of reaching a free trade agreement between the European Union and South America’s Mercosur trade bloc before the current members of the European Commission step down.

The new EU Commission headed by former Portuguese prime minister José Manuel Durao Barroso (2002-2004), which takes office Nov. 1, will continue the complex negotiations on a date to be set in the first quarter of 2005, after a technical-level meeting before the end of this year.

In formal diplomatic language, the brief statement issued at the end of the meeting at around midnight Wednesday said substantial progress had been made, but "there is still much to do before reaching the required level which the strategic importance of this accord between the EU and Mercosur reflects."

Taking part in the meeting in Lisbon were European commissioners for trade and farming, Pascal Lamy and Franz Fischler, foreign ministers Celso Amorim of Brazil and Leila Rashid of Paraguay, deputy foreign minister William Ehlers of Uruguay, and Argentina’s Secretary of Trade and International Economic Relations Alfredo Chiaradia.

Speaking with the press after the meeting in the wee hours of Thursday morning, Lamy and Amorim alluded to the description by analysts of Oct. 20 as "the last chance" to sign an agreement.

The negotiations were about substance, not deadlines or timetables, and they will continue to be pursued by our successors, just as we inherited them from our predecessors, said Lamy, referring to the upcoming replacement of the European Commission, the EU executive arm.

Brazilian Minister Amorim, speaking in the name of his counterparts from Argentina, Paraguay and Uruguay – the other full members of Mercosur (Southern Common Market) – put special emphasis on "the strong political will, and the significant progress" made in Lisbon.

Both sides "showed great flexibility on some points, which was not sufficient to reach an accord, but was sufficient to allow us to be optimistic, because the strong interest in reaching an agreement, shared by both blocs, was made clear," said Amorim.

He also underlined that "Mercosur spoke with one voice," independently of specific national interests in each of the bloc’s member countries.

The basic concept underlying the meeting "was the effort to explore the limits of the negotiations, something that had not been sounded out before," added the minister.

According to the Mercosur representatives, the EU has set new conditions for expanding its quotas of imports of some farm products, while the EU sees the South American bloc’s proposal for opening up the automobile industry, service sector and government procurements as overly limited.

On the agricultural trade front, the touchiest area in the talks, the powerful European lobbies, led by the intransigent French position, have raised the main obstacles to an agreement.

The talks have dragged on for five years without any concrete results.

Economists on both sides of the Atlantic say a free trade deal would be an important boost to trade between the two blocs, which currently exceeds 40 billion dollars a year.

If an accord is reached next year, the world’s biggest free trade area would be created, with nearly 700 million people.

But in a recent interview with the Diario Económico, a Lisbon newspaper, Brazil’s ambassador to the World Trade Organisation (WTO), José Alfredo Graça Lima, said it would be preferable for Mercosur to wait for the multilateral trade talks in the WTO to advance before agreeing to an accord with the EU.

Portuguese economic analyst Alfredo Valladao said "the diplomats on both sides are convinced of the need for this agreement, but have been unable to confront the clamour from those who do not want any accord."

"The negotiators of the (EU) Commission want to close the deal because they believe that a Mercosur based on an EU-style blueprint could be the ideal ally for promoting a more multilateral world," he added in an analysis published Wednesday.

But the EU is also aware that guarantees are necessary for exports and investment in Mercosur "due to the dangers posed by a future Free Trade Area of the Americas (FTAA), because without such guarantees it would be like handing over control to the United States," warned Valladao.

Negotiations for the FTAA, which would comprise all countries of the Americas with the exception of Cuba, have virtually come to a standstill.

Lamy and Amorim presented an upbeat image at the end of Wednesday’s meeting, saying "areas of possible flexibility" were explored.

According to Lamy, the meeting’s big achievement was the strong level of confidence and trust that was reached. "The question today is very simple: do we stop the train or do we carry on?" he added, underlining that both sides chose the second alternative.