Lamy: ‘Mercosur trade deal a long shot’

By David Cronin

Date: 14/10/04

PASCAL Lamy appears resigned to failure in his last challenge as European trade commissioner: setting up the world's largest free-trade zone.

After five years, talks between the EU and the Mercosur bloc of Brazil, Argentina, Uruguay and Paraguay will arrive at a crunch moment in Lisbon next Wednesday (20 October), when Lamy gathers with ministers from the four countries.

While their goal is to set up a free trade zone comprising 650 million people before Lamy leaves office at the end of this month, he is not too optimistic that this will be succeeded. "Given where we stand today, you'd need a huge quantum leap," he said this week.

Concluding an accord is perceived by the four countries, who formed the Southern Common Market (Mercosur) in 1991, as necessary to strengthen their hand with the US in talks - supposed to get underway early next year - on the Free Trade Area of the Americas. Trade between the EU and Mercosur was worth €40 billion in 2003.

Failure to finalize a deal would mean that responsibility for the dossier would be passed on to Lamy's successor, Peter Mandelson. The UK politician has been reticent about how he intends to proceed but there has been speculation that he would postpone talks if a breakthrough proves elusive in the coming few weeks.

Despite the Mercosur states' desire for a deal, they are adamant it will not be at any price. As Brazil's Foreign Minister Celso Amorim said: "The negotiations must take place but the timetable cannot compromise the content of the negotiations."

The trickiest issues to resolve have related to EU demands for bigger access to public works and services contracts in South America. The Mercosur states, on the other hand, want to be allowed to sell more agricultural produce to the EU than the Commission and member states have been willing to contemplate.

They feel the Union is not willing to open its markets to large-scale exports of beef and chicken. The meat question is particularly an issue for Brazil, which at 182 million cattle boasts the world's largest herd. Although Argentina is also a significant beef producer, there have been suggestions it is ready to accept a smaller level of market access than its neighbour.

Officially, the four are sticking behind a demand for unrestricted access to the Union's markets for agricultural goods. But the EU has tried to limit the amount of beef it will accept to 60,000 tonnes over a decade. "That means 6,000 tonnes the first year - less than a single shipload," Mercosur's chief negotiator Regis Arslanian has noted with dissatisfaction.

Anti-poverty activists are calling for the Union to be more generous. "The underlying problem is that the EU tends to say 'well, let's treat them as developed countries' and expect full reciprocity," says Oxfam's Michael Bailey. "But Brazil has one-seventh of the average income in Europe. We wouldn't argue that it should be treated as a LDC [least developed country]. In the real world of trade negotiations, it would have to give something. But it shouldn't have to give too much."

The Commission, he argues, should take heed of a statement made by the British government in its White Paper on trade published earlier this year. "This said that it is right to open markets to developing countries whatever the circumstances. It was the first time that an industrialized country said we are not going to engage in mercantilist bargaining. You can agree or not but that view has not prevailed in Brussels."

Preview of a meeting of European Commissioner for Trade, Pascal Lamy and Ministers from the four Mercosur countries, Brazil, Argentina, Uruguay and Paraguay on 20 October.

Article suggests that after five years of talks between the EU and the Mercosur bloc on the setting-up of a free-trade zone the parties had arrived at a crucial moment.

European Commission: DG Trade: Policy: Countries and regions: Mercosur http://ec.europa.eu/trade/policy/countries-and-regions/regions/mercosur/

---