EU-Mercosur still far from ambitious trade pact

Reuters

EU-Mercosur still far from ambitious trade pact

25 May 2004

By Guido Nejamkis

BRASILIA, Brazil, May 25 (Reuters) - Talks to link the European Union and South America in one of the world’s largest trade pacts are in their final phase but pose difficult challenges on both sides of the Atlantic.

Leaders from the European Union and South America’s Mercosur customs bloc — made up of Argentina, Brazil, Uruguay and Paraguay — are expected to give political support to a deal by October when they meet this week at a summit in Guadalajara, Mexico.

Analysts and negotiators say Brussels’ most recent offer leaves little space for big increases in farm product exports that South American nations are after.

Brussels, in turn, is not entirely happy with Mercosur’s offer, which excludes imports of capital goods and iron and steel products the EU is keen to export.

"Rather than a free trade offer, the European Union’s (proposal) is an appeal to the good will of Mercosur," said Andre Nassar, executive director of Brazil’s Institute for the Study of International trade and Negotiations, or Icone. "It’s a way to partially please."

Europe is a crucial agricultural market for Mercosur. Europe sees South America’s southern tip as a key area for services and manufactured goods. Both blocs want to create trade and at the same time protect sensitive industries.

Brazil, Mercosur’s largest member, sees a well-negotiated EU pact as a model for Americas-wide free trade talks now paralyzed over issues such as access to U.S. farm markets.

LONG WAY TO GO

A fresh EU offer last week proposed import quotas for an extra 100,000 tons of so-called Hilton high-quality beef, 75,000 tons of poultry products and 11,000 tons of pork.

Mercosur’s powerful farm industry wants to export more of these products to Europe. The region’s agricultural producers, who compete on world markets without the aid of subsidies, have asked for quotas to export an extra 350,000 tons of beef, 250,000 tons of chicken and 40,000 tons of pork.

There will be no negotiations in Guadalajara, only talks on steps to move the deal along, EU and Mercosur officials said.

"It’s been clear from the start of talks on agriculture that the European offer has limits," said one senior Brazilian negotiator, who asked not to be named. "In my opinion they shouldn’t have created false expectations of an ambitious offer in this area."

Around half of Mercosur’s $24.5 billion in exports to the EU last year were in agricultural products. They represented 35 percent of Mercosur’s total farm exports.

Another problem with the EU offer is only half the quotas would go into effect when the trade deal began, Nassar said. The other 50 percent are tied to talks at the World Trade Organization and would be available to any interested nation.

What is on the table is only "the beginning of the end of negotiations. It remains up to Mercosur to seek improvements and hopefully political support in Guadalajara," Nassar said.

The European Union is seeking concessions in the areas of services, industrial goods and government purchases.

Mercosur’s offer proposes preferential treatment on nearly 90 percent of European products but leaves out key areas. Mercosur has excluded capital goods, manufactured plastics, foundry iron and steel — high-value products Europe is keen to export. South American nations fear such imports could hurt their domestic industries.

Negotiators will next meet in Buenos Aires on June 7.