Bridges Weekly Trade News DigestVolume 17Number 12 • 11th April 2013

Brazilian Minister: EU-Mercosur Talks to Pick Up Momentum This Year

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The long-running trade negotiations between the EU and South American customs union Mercosur may witness a renewed push during the second half of 2013, according to Brazilian Foreign Minister Antonio Patriota. Talks for the region-to-region deal began almost fifteen years ago, but have so far failed to produce an agreement.

The talks, which began in 1999, stalled in 2004 over disagreements related to agricultural market access, among other topics, and only resumed in 2010. (See Bridges Weekly, 19 May 2010) Negotiators have been meeting since then in the hopes of hammering out the terms of a final accord, with limited result.

Efforts to reinvigorate the talks in the coming months will include an offer of trading concessions from Brasilia to Brussels, according to the Financial Times. Fellow Mercosur member Uruguay, however, will formally take the lead on the EU talks during this first phase.

Patriota has not outlined a timetable or deadline for completion of the planned deal. However, he noted, the talks “have advanced more than half the way in the negotiations road map.”

Long-standing sticking points - such as agriculture and auto manufacturing - remain sensitive, according to the Brazilian official. However, both sides have expressed a willingness to move forward, he added, and have a “clear political and commercial interest to reach an agreement in the shortest time possible.”

EU officials have similarly expressed an interest in quickly bringing the talks to a close, as Brussels continues its push for clinching trade pacts with various partners as part of a broader strategy to boost growth and jobs in the 27-member bloc.

“We would really like to have this Mercosul [agreement], especially with Brazil,” said Elmar Brok, a member of the committee on foreign affairs of the European Parliament, in a statement to the Financial Times. [Mercosul is the Portuguese term for Mercosur.]

The need for Mercosur to expand its own external agenda - having few deals with outside countries - was recently highlighted by Uruguayan President José Mujica, who currently holds the pro tempore presidency of the bloc. “We need a discussion on the direction of things that are going on in the world, along with Mercosur’s internal problems, where it is very clear that we are stalled,” he said in a recent letter to fellow leaders. “In addition, there is a great mobility in the world that we have to take into account.”

Officials say than an EU-Mercosur deal would create one of the largest trade pacts in the world, covering some 750 million people.

Questions linger over Paraguay suspension

Along with their difficulties in resolving long-standing differences over issues such as agricultural trade, the short-term future of the EU-Mercosur negotiations had also been put into limbo over the past several months, following the suspension of Paraguay’s membership from the South American customs union last July.

The suspension - the result of the Paraguayan Senate’s impeachment of President Fernando Lugo - also led to the inclusion of Venezuela as a full member. Both moves were lambasted by Asunción, which questioned the legality of bringing in Caracas in its absence.

Paraguay’s fellow Mercosur partners - Argentina, Brazil, and Uruguay - have since indicated that Asunción could potentially be readmitted as a full member following the country’s presidential elections later this month. Negotiations with Brussels will resume after that election and the subsequent decision on whether to readmit Paraguay, according to Patriota.

While delegates from both the EU and Mercosur have met since Asunción’s suspension, how much the internal reshuffling of the South American bloc’s membership could affect the trade talks still remains unclear. German Ambassador to Paraguay Claude Robert Ellner has recently said that Paraguay’s readmission would be a prerequisite to further talks on a bilateral trade deal.

Patriota: Trade tensions with Argentina remain

Patriota also noted last week that trade with fellow Mercosur heavyweight Argentina was “less than satisfactory,” and that the trade impacts resulting from Buenos Aires’  attempts to protect local industry are not in line with efforts to strengthen the Southern American customs union.

The two neighbours have long had disagreements over trade issues, particularly over delays in products crossing their shared border. The Brazilian Foreign Minister noted that Argentina’ import policies - which have come under fire from many of its trading partners - have particularly hit Brazil’s textile and footwear industries in recent months.

However, the Brazilian official qualified that, despite these tensions, the “health” of the Mercosur bloc has not suffered as a result.

ICTSD reporting; “Brazil says trade ‘not favourable’,” BUENOS AIRES HERALD, 5 April 2013; “Brazil hopeful an EU/Mercosur trade accord can be concluded this year,” MERCOPRESS, 6 April 2013; “Mercosur, EU to resume trade negotiations: Brazilian FM,” XINHUA, 5 April 2013; “Brasil admite problems comerciales con Argentina,” EL LITORAL, 5 April 2013; “Para Brasil, con Argentina hay ‘áreas problemáticas,” CLARÍN, 5 April 2013, “Mujica pide “sinceridad” a socios del Mercosur para saber qué rumbo seguir,” EL DIARIO, 10 April 2013.

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