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Deadline for Mercosur-EU talks jeopardised

IPS | 2 October 2004

Deadline for Mercosur-EU Talks Jeopardised

Mario Osava

RIO DE JANEIRO, Oct 2 (IPS) - No one is admitting it publicly, but there is now little doubt that nine years of negotiations to reach a free trade agreement between South America’s Mercosur trade bloc and the European Union have failed, without even leaving any real hope for the coming year.

Freeing up trade is "a complex process that implies short-term losses," and therefore demands "a strong political will" that is evidently lacking on both sides, said Pedro Camargo Neto, an active private sector participant in the trade talks as director of international relations for the Brazilian Rural Society, which represents large-scale farmers.

The failure of the current round of talks "was foreseeable," because there have long been signs of insufficient will and internal disputes both within the two blocs and within member countries. These factors would obviously limit the concessions made by both sides, Camargo told IPS.

This is reflected in the latest proposals exchanged by Mercosur — the Southern Common Market, made up of Argentina, Brazil, Paraguay and Uruguay — and the 25-nation European Union. It was hoped that an agreement could be reached by Oct. 31, the end of the term of the current European Commission, the EU’s executive arm. But those hopes have been replaced by mutual disappointment.

The EU proposal, submitted Wednesday, "does not match or even come close" to the improved offer put forward on Sep. 24 by Mercosur, according to the Brazilian foreign ministry.

The latest European offer was received by Brazil, which currently holds the six-month rotating presidency of Mercosur. The Brazilian foreign ministry’s preliminary evaluation of the proposal, and the proposal itself, will be discussed with the Brazilian Business Coalition on Tuesday and with the other Mercosur member countries next Thursday and Friday in Brasilia.

The new European proposal falls short of the offers made officially in May and unofficially in early September, according to the Brazilian foreign ministry. The quotas for farm products, for example, remain the same, but "new conditions" have been introduced.

Any increase in quotas would now be conditioned on the results of the World Trade Organisation’s Doha Round of talks on agricultural trade liberalisation.

In the case of beef, for example, Brazil would be given an export quota of 2,400 tons for the first year, which is a mere fraction of the 95,000 tons it now sells annually to the European market, with tariffs of up to 176 percent.

Mercosur, for its part, has made a major effort to improve its package of proposals, offering to lift or reduce tariffs on 90 percent of goods imported from the EU and to open its markets to Europe in the areas of investment, services and government procurements, the Brazilian foreign ministry said.

Nevertheless, some European governments view the concessions made by Mercosur as insufficient.

In Camargo’s opinion, the Mercosur-EU negotiations could only be saved by the addition of a "new" factor, such as a reinvigoration of the talks on the proposed continent-wide Free Trade Area of the Americas (FTAA), which have been brought to a standstill due partly to conflicting visions on the part of Brazil and the United States, the co-chairs of the current round of talks.

Advances in the FTAA negotiations would serve as a "stimulus" for further progress towards a Mercosur-EU trade pact, because competition between the two processes would force the Europeans to make greater concessions, argued Camargo.

Brazil could also change its attitude, if the government of Luiz Inácio Lula de Silva "had a better idea of what it wants" from trade integration, Camargo said.

This latest round of negotiations served to expose certain conflicts of interest between Mercosur member nations and between different sectors within each country, which have thrown up further obstacles to reaching an agreement.

The agricultural sector, which has the greatest interest in a free trade accord with the EU, criticised the resistance put up by the industrial and service sectors.

Antonio Donizeti Beraldo, the foreign trade director of the Brazilian National Agricultural Federation, said that Mercosur had proved "incapable" of drawing up a proposal attractive enough to lead to an agreement.

Brazil put special emphasis, for example, on the "emerging industry" clause, which allows for an increase in tariff protection for products that a country is just beginning to manufacture on its own. The provision is aimed at keeping the door open for the expansion of industrialisation in the future, but it is also a hurdle for reaching an agreement.

In the meantime, Argentina’s demands limited the concessions made by Mercosur with regard to the automotive and textile industries.

Brazil was prepared to offer the EU a quota of at least 100,000 motor vehicles and the gradual removal of all tariffs in the sector over the course of 10 years. The offer finally put forward by Mercosur, however, was far more restrictive, due to Argentina’s hopes of rebuilding its own automotive industry, which has been hit hard by the economic crisis of the past few years.

Across the Atlantic, internal disagreements have kept the EU from substantially opening its heavily protected agricultural market, as Mercosur has insistently demanded.

 source: IPS