TRADE: ‘Four Plus One’ Could Add Up to Zero for Mercosur, US

By Mario Osava Reprint | | Print |

Mario Osava

RIO DE JANEIRO, Aug 31 2001 (IPS) - The United States and South America’s Mercosur trade bloc will start talks on a possible trade agreement in Uruguay next Tuesday, which are to run parallel to the negotiations on the Free Trade Area of the Americas (FTAA).

The Mercosur – made up of Argentina, Brazil, Paraguay and Uruguay – and the United States are seeking a short-cut, to circumvent obstacles run into by the FTAA negotiators, who represent 34 countries with diverse economies of vastly different sizes.

The “four plus one” initiative arose against the backdrop of Argentina’s financial crisis, and “it would be positive if the United States would effectively open its market” to agribusiness products, an area in which Argentina is competitive, Mario Marconini, executive director of the Brazilian Centre on Foreign Relations (CEBRI), told IPS.

But Washington is taking the opposite route. It actually increased farm subsidies to 30 billion dollars this year, and has lined up nearly 200 billion dollars in subsidies over the next 10 years, pointed out Marconini, a former Brazilian secretary of Foreign Trade.

The first obstacle standing in the way of the proposed “four plus one” agreement between the Mercosur and the United States is the U.S. Congress’ reluctance to grant the administration of George W. Bush “fast track” authority to negotiate free trade deals without the risk of having them amended later by the legislature, he pointed out.

Furthermore, said Marconini, “it is difficult to imagine” the United States making concessions to allow Latin America broad access to its market, given that it has not shown a clear interest in eliminating farm subsidies or overturning anti-dumping legislation that is standing in the way of a number of Brazilian exports.

(“Dumping” refers to the export of products at prices deemed artificially low).

Exorbitant tariffs, in some cases over 100 percent, restrict the entry of 129 products into the United States, according to a study by CEBRI. That list includes “all of Brazil’s competitive goods,” observed Marconini.

Washington could lift such barriers and increase the quotas it sets on imports of a number of products, to open its market to merchandise from the Mercosur countries. But in exchange, it would seek to throw open the market for services, government procurements, and other areas that are sensitive for Brazil, he added.

Nevertheless, “we must not desist from negotiating a four plus one” accord, since Brazil, Latin America’s giant, and the Mercosur – a bloc of 215 million potential consumers that accounts for nearly 80 percent of South America’s combined GDP – have economic clout and can obtain benefits through such an agreement, he argued.

The first meeting will take place Tuesday in the resort city of Punta del Este, 140 kms east of Montevideo, the Uruguayan capital, where the Cairns Group – comprised of 17 agricultural exporting countries seeking the elimination of farm subsidies worldwide – will be gathering.

The ministers of agriculture and foreign affairs of Argentina, Brazil, Paraguay and Uruguay will be present at the Punta del Este Cairns Group conference, where U.S. Trade Representative Robert Zoellick will be representing the United States, which was invited to the meeting even though it does not form part of the Cairns Group.

The second Mercosur-U.S. meeting has been scheduled for Sep 21 in Washington.

The negotiations of the “four plus one” accord could be partly modeled on the experience of Chile, which is working hard to sign a free trade agreement with the United States this year. Chilean negotiators aim to include a bilateral dispute settlement mechanism in the future Chile-U.S. accord.

The dialogue between the South American trade bloc and the United States is positive, because the Mercosur is strengthened every time it negotiates as a bloc, and further wards off the threat that it will dissolve within the FTAA, said Rubens Ricúpero, Secretary-General of the United Nations Conference on Trade and Development (UNCTAD).

The imbalance of forces is inevitable given the enormous power of the United States, but it is attenuated if the interlocutor is a group of nations, said Ricúpero, a former Brazilian finance minister, who added that Mercosur associates Bolivia and Chile gave the bloc’s position in the talks added strength.

The Mercosur’s success in the negotiations with the United States “will depend on the agenda and the issues to be negotiated,” he stated. But the ideal, he said, is for the dialogue to take place “simultaneously to and in a harmounious manner with the multilateral talks in the World Trade Organisation (WTO).”

It is probable that the United States will refuse to negotiate its farm subsidies and stringent anti-dumping rules with Latin American countries, but “it will do so somewhere,” asserted Ricúpero.

Holding parallel negotiations in different fields will highlight the chances in each set of talks of making progress on each specific issue, and “an informal link” between the two dialogue processes will thus be forged, said Ricúpero.

Moreoever, Brazil – and in consequence the Mercosur – is in a very different position than Mexico was when it signed the North American Free Trade Agreement (NAFTA) with Canada and the United States. Even before NAFTA went into effect in 1995, 80 percent of Mexico’s exports were going to the United States.

Brazil’s exports, on the other hand, are distributed in similar proportions between the European Union, the United States, Asia and Latin America, which means it must play “on every board,” especially in the WTO, which is improving access to the markets of 142 countries, said Ricúpero.

Marconini said “it came as a surprise” that the United States would announce its plan to negotiate with the Mercosur just when the International Monetary Fund, with Washington’s blessing, was deciding to grant Argentina eight billion dollars in credit.

“That association between finances and trade is never clearly expressed,” although it should be, he observed.

However, the idea of dialogue between the Mercosur and the United States “is not new,” underlined Ricúpero. Indeed, in 1991, when the South American bloc was first being created, the United States and the Mercosur agreed to set up a forum for trade talks, although the initiative ended up falling by the wayside.