In the margins of the EU-Latin America summit held in May, high officials from the two sides reviewed developments and future challenges in their trade relationship.
While it has been widely expected that long-stagnant talks on a trade and co-operation agreement between the EU and the Mersosur bloc (Argentina, Brazil, Paraguay and Uruguay) would pick up once the Doha Round either concludes or fails, the talks in Lima did little to advance that aim.
European Commission President José Manuel Barroso told Argentine President Cristina Kirschner that while Mercosur countries stood to gain much in agriculture, those gains would not materialise unless the bloc made concessions in industrial market access and services. He added that “without concessions in agriculture, it will not be possible for the EU to lower tariffs or expand quotas either in the Doha Round or in the bilateral relationship.” President Kirschner said her country was prepared to reduce tariffs on manufactures, but not to the extent sought by the EU, because the European demands would lead to increased poverty.
There is also tension between Brazil and the EU over biofuels. The latter is under pressure to develop stronger sustainability criteria for biofuel imports, and may drop its current target of having biofuels account for at least 10 percent of vehicle fuel by 2020 (see page 20). Brazil has already warned of a potential WTO challenge if future European environmental norms turn out to harm its ethanol exports.
The situation is also unclear with regard to the EU-Andean Community (CAN) negotiations. The European Commission’s official position remains that any future treaty must be ‘region to region’ and encompass all CAN members, i.e. Bolivia, Colombia, Ecuador and Peru. However, many predict that the EU may ultimately follow the US route and sign separate agreements with only Colombia and Peru due to the other two CAN members’ resistance to the broad scope of the provisions that the EU is seeking to include in the trade pillar of the association agreement. The next round of negotiations is scheduled for July.
EU-Central America Talks Advance Slowly
In related news, trade negotiations between the EU and six Central American countries made limited progress on the thorniest issues in April.
For Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua, the agreement should lock in and improve preferential market access currently granted by the EU (Panama is participating in the talks as an observer). Under its Generalised System of Preferences Plus (GSP-plus) scheme, intended to reward and encourage efforts to combat drug production and trafficking, Brussels provides the Central American countries preferential access for around 7,200 products (200 more than the ‘ordinary’ GSP). Roughly half of these enter the EU duty-free, while the rest are classified as ‘sensitive’ and benefit from tariffs 3.5 percentage points below the standard most-favoured-nation (MFN) rate paid by countries that do not receive preferences.
Although Central America has benefited from this scheme, most of the region’s competitive exports, including beef, dairy products and sugar, still face tariffs approaching 100 percent in some cases. Costa Rica’s chief negotiator Roberto Echandi said that Central America would push hard for all products that already receive duty-free treatment, as well as those with export potential in the future, to be included in the new agreement.
Negotiations promise to particularly difficult on products such as sugar and bananas. The positions of the two sides mirror the WTO agriculture talks, which are still deadlocked between Latin American countries calling for steep liberalisation of so-called ‘tropical’ products and the African, Caribbean and Pacific (ACP) group seeking to avoid erosion of their longstanding preferential market access to the EU (see page 6). European and Central American negotiators will meet again in Brussels from 14-18 July.