Bridges Weekly Trade News Digest • Volume 8 • Number 33 • 6th October 2004
EU-Mercosur Trade Deal On Ropes Over Lack Of Acceptable Offers
South American trade bloc Mercosur made an offer to the EU on 24 September in the hope of advancing stalled trade negotiations and completing a trade deal by the 31 October deadline. The EU submitted its ‘response’ offer on 29 September, but neither offer helped to progress trade negotiations, making a free trade agreement between the two blocs an increasingly distant prospect.
According to Brazil’s Foreign Ministry, Mercosur — comprised of Argentina, Brazil, Paraguay and Uruguay, with Bolivia, Chile, Peru and Venezuela as associate members — offered to increase the list of EU imports covered by the free trade agreement from 88 to 90 percent. Though the total number of products with reduced duties was increased, the number of EU goods that could enter Mercosur duty-free after 10 years was diminished. The Brazilian Foreign Ministry also claimed Mercosur’s offer addressed European concerns regarding access to financial services and telecommunications sectors while giving European business preferential treatment for government contracts with the four core Mercosur members.
The European offer made little improvement on earlier submissions, and instead fell short of the offers it made officially in May and unofficially in early September. Though the quotas for farm products remained the same, "new conditions" were introduced, according to Brazil, and any increase in quotas was made dependent on the results of the WTO’s Doha Round of talks on agricultural trade liberalisation. Brazil and Argentina said they were extremely disappointed in the EU’s offer, as they had hoped for greater access to the lucrative EU agriculture market. Brazil’s Foreign Ministry said the offer is "below the quantitative levels that were indicated by the EU earlier this month in Brussels, it does not look like this [EU] Commission is ready to do a deal." Likewise, the EU viewed Mercosur’s offer as a last-minute attempt to conclude long-troubled negotiations before the October deadline and consequently produced an offer that was equally minimalist, suggesting that trade negotiations between the two regions are not likely to overcome the tensions surrounding agriculture before a new EU Trade Commission takes office on 1 November.
These most recent events suggest that nine years of negotiations to reach a free trade agreement between South America’s Mercosur trade bloc and the European Union have failed. Some private sector consultants blame the failure on weak political will and internal disputes both within the two blocs and within member countries. The conflicting objectives of the agricultural sector versus the industrial sector, for instance, illustrate the conflicts of interest between Mercosur member nations and between different sectors within each country. Similarly in the EU, internal disputes have prevented the EU from substantially opening its heavily protected agricultural market, despite Mercosur’s persistent demands.
"South Americans Make Offer to EU on Trade," AP, 26 September 2004; "Brazil Says EU Trade Offer Puts Deadline In Doubt," REUTERS, 29 September 2004; "Mercosur Submits New Free Trade Offer To EU, Toughens Proposals On Duties," INTERNATIONAL TRADE REPORTER, 30 September 2004; "Trade: Deadline For Mercosur-EU Talks Jeopardised," TERRAVIVA, 4 October 2004.