EU-Mercosur talks mark ‘new stage’ in ties

Date: 25/11/1999

By Gareth Harding

TALKS between the EU and the Mercosur bloc aimed at creating the world's biggest free-trade area began this week, but negotiations on scrapping tariffs will have to wait until July 2001 because of the Union's insistence that they cannot begin until progress has been made in the forthcoming round of world trade talks.

Uruguay's Ambassador to the EU Guillermo Valles nevertheless hailed the start of negotiations as a "new stage in relations between the EU and Mercosur".

There is, undoubtedly, an emormous amount at stake in the talks, which are likely to take more than three years to complete.

Mercosur, which groups together South America's two biggest economies - Brazil and Argentina - with Uruguay and Paraguay, has a strong interest in clinching a free-trade agreement with the EU. Imports from the Union to the region increased by a massive 335% between 1990-98, while exports grew by only 39%.

In addition, the EU is by far the largest market for Mercosur's exports, despite the bloc's proximity to the US.

However, a study of trade between the two continents reveals why the discussions on tariffs will be long and complex when they eventually begin. The vast majority of the Union's shipments to the southern American grouping are industrial goods, while Mercosur's main exports are agricultural.

Latin America's most powerful trade bloc will push for the Union to scrap its generous subsidies to farmers during the marathon talks. It will also stress the need to include agricultural products in the new round of World Trade Organisation negotiations which begin in Seattle next week.

The 'millennium round' will certainly cast a long shadow over the EU-Mercosur talks. However, Valles argues that the Geneva-based body does not hold a monopoly over market-opening talks, insisting: "We are not suspending anything because of the WTO negotiations."

At the first meeting of the EU-Mercosur Cooperation Council yesterday (24 November), the two sides set up a number of bodies to coordinate the talks and sketched out the timetable for negotiations over the next year.

The aim is to remove all non-tariff barriers to trade by July 2001. With the central negotiating committee due to meet for the first time in April, EU and Mercosur negotiators will have their work cut out to meet the deadline. However, there is a renewed feeling of optimism as the two sides prepare to start talking in earnest.

In a statement issued after this week's ministerial meeting in Brussels, negotiators said that "the climate for beginning negotiations is favourable" because of economic growth in both trade blocs, a new impulse towards integration in the South American group and the value which the EU attaches to signing free-trade agreements with like-minded groups of states.

Talks between the EU and the Mercosur bloc aimed at creating the world's biggest free-trade area began on 24.11.99, but negotiations on scrapping tariffs will have to wait until July 2001 because of the Union's insistence that they cannot begin until progress has been made in the forthcoming round of world trade talks.