Union takes ‘snapshot’ of Mercosur trade

Date: 30/04/1998

By Mark Turner

THE EU took a step closer to liberal trade with the Southern American Mercosur bloc this week with the completion of a 'snapshot' of commerce between the two regions.

Officials say the study, a 60-page technical analysis of the trade in goods and services, and 'standards' such as competition law and anti-dumping policy, opens the door to a more political phase of discussions.

Although both sides stress there is no cast-iron timetable, talks on a free trade area could be launched at an EU-Mercosur meeting in the first half of next year, held in the margins of the EU-Latin America summit in Río de Janeiro.

"We are finishing the first stage on the way to possible negotiations for an inter-regional Association Agreement," said Brazilian ambassador to the EU Jorio Dauster Magalhaes E Silva. "There is a clear-cut interest on both sides to do this."

The European Commission now hopes to have a draft negotiating mandate ready for examination by EU governments in June or July.

Since Mercosur's creation in 1991, the bloc has established itself as an important regional trade power. Its four members (Argentina, Brazil, Paraguay and Uruguay) boast 190 million consumers, and a joint gross domestic product of around 800 billion ecu. Chile and Bolivia have become associate members, and the Andean Community recently entered into a free trade agreement with the organisation.

The discussions with the EU have taken on a new sense of urgency for Europe in the wake of renewed calls for a 'free trade zone of the Americas' by 2005, at the Santiago de Chile summit earlier this month.

Although the Union remains Mercosur's most important trade partner (taking around 25-30% of its exports, compared with 20% going to the United States), the Americans last year overtook Union investment in the region.

The rapid decline in Europe's market share in Mexico following its participation in the North American Free Trade Agreement (NAFTA) has provided Brussels with an all-too-clear example of the perils of ignoring the impact of pan-American free trade.

Nonetheless, officials on both sides of the Atlantic remain cautious about how quickly they can reach a deal.

Mercosur is, for example, keen to gain greater access to EU agriculture markets. But farm liberalisation talks in the World Trade Organisation, the Union's own internal reform process and Europe's enlargement to central and eastern Europe are all likely to take precedence.

On the other side of the coin, the Union is calling for Brazil to lower industrial tariffs and wants more access to Brazilian and Uruguayan services markets.

It is clear that the priority for Mercosur countries remains, first and foremost, regional integration. This is demonstrated by Argentine concerns that a free trade zone of the Americas could, in practice, deny the country Brazilian markets which it has only just started to gain.

"Mercosur's priority is Mercosur itself," said a spokesman at Argentina's mission to the EU.