March 10, 2014
EU-Mercosur talking across each other over trade agreement
Argentina was seen as the main obstacle but new problems arose in Brazil and Brussels
This was supposed to finally be the year. After 31 months of talks, 2013 was supposed to mark the time when the European Union and the Mercosur bloc were going to present their respective offers for a free trade deal all sides claim to want.
Yet 2013 will end as it began —without any concrete progress. And with new trade conflicts that seem to be an inauspicious beginning to cooperation.
Negotiations are currently in a lull, after the EU moved to postpone a critical meeting until January. Argentina has harshly criticized the delay, but the EU insists the postponement was merely a pragmatic decision that had to do with the holidays and should not be interpreted as hesitation to seal the deal.
“Both the EU and Mercosur are in the final steps of the preparation of their respective market access offers. There is no questioning the commitment there is on both sides,” John Clancy, EU Trade spokesman, told the Herald.
“We will be in close contact with Mercosur and we expect to be able to fix a date soon for such an exchange,” Clancy said.
Yet even as officials highlight their willingness to seal a deal, old disputes have come to the forefront.
The EU and Argentina both filed formal complaints at the World Trade Organization this week in a move that shows the not-so-rosy relations between the trade blocks.
Argentina is seeking redress at the WTO for what it has characterized as the EU’s illegal decision to slap anti-dumping duties on biodiesel imports from Argentina. For its part, the EU launched a case at the WTO against Brazil over the country’s taxes on imports on a range from products, from cars to computers.
A LONG STORY
The Mercosur and EU officially relaunched trade negotiations at a summit in Madrid on May 17, 2010 and since then the objective has been to negotiate a comprehensive deal. Negotiations have been hard-fought because the two trade blocs want to make sure the deal includes everything from industrial goods and agricultural production to services and intellectual property.
Nine negotiation rounds later, talks continue. Argentina’s protectionist policies have long been seen as an obstacle to any agreement but Brazil’s strong interest in a deal has led the government to change its mind and express a willingness to present a joint proposal.
“Brazil wants to expand its markets and take advantage of the European crisis. They pressured the government to present an offer that includes substantial trade issues,” Dante Sica, head of the Abeceb consultancy, told the Herald. “It’s a very important agreement for Brazil.”
Foreign Ministry sources told the Herald that Argentina’s position has not changed, but after meetings in Buenos Aires and Río de Janeiro between Argentina and Brazil government officials, Brazilian Trade Minister Fernando Pimentel was the only one to talk to the media, telling the world that Argentina was on board and a joint Mercosur offer will be presented. Before that, Brazilian officials let other Latin American and European diplomats know that Argentine government was the main obstacle to reach an agreement and their patience was running short.
Yet now that has been delayed and complained to the EU’s ambassador in Argentina, Alfonso Diez Torres. The EU, however, insists the delay should not be overinterpreted.
“Given the upcoming Christmas break, the EU Trade Commissioner suggested to precede with the exchange in early 2014. We remain committed to an ambitious and comprehensive offer,” Clancy said.
Risks and challenges
Ensuring preferential access could be a big boost to Mercosur’s economies, considering the EU is the bloc’s first trading partner, accounting for 20 percent of its total trade. According to an independent study touted by the European Commission, Mercosur would experience an overall GDP growth of up to 3 billion euros and a 40 percent increase in exports.
Some, however, insist those estimates are overly positive and there are real risks to an agreement.
“The economic crisis has led to a drop in sales by European companies that could lead to an oversupply of goods sent to Mercosur countries,” Martín Burgos, economist at the Centro Cultural de la Cooperación, told the Herald, adding that a deal could negatively impact Argentina.
Mercosur is the EU’s eighth most important trading partner, accounting for 3 percent of the EU’s total trade. EU’s exports to the region have steadily increased over the last years, going from 28 billion euros in 2007 to 57 billion in 2012.
Even if both sides agree on the broad outlines of the deal, there is much negotiation ahead.
“Mercosur hopes to achieve an agreement soon and Brazil is working strongly for that. Nevertheless, EU’s expectations are not clear,” Sica told the Herald. “Now both blocks are arguing because of goods and it’s going to be a difficult discussion.”