Bridges Weekly Trade News Digest • Volume 14 • Number 18 • 19th May 2010

EU Resumes Trade Talks with Mercosur, Concludes Talks with Central America

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The European Union made significant headway on opening up commerce with Latin America this week, re-launching talks with Mercosur, wrapping up trade negotiations with Central America, and signing deals with Colombia and Peru. Announcements on all fronts were made at a summit of European, Latin American and Caribbean heads of state, who met in Madrid from 17-19 May.

EU-Mercosur talks restarted

The European Union started negotiating a trade deal with Mercosur - the South American customs union made up of Argentina, Brazil, Paraguay and Uruguay - in 1999, but the talks froze in October 2004, when the two sides hit a stalemate on the liberalisation of agricultural trade. The Mercosur countries wanted the European market to be more open to imports of their farm products, but the EU, facing strong pressure from European farming lobbies, refused to yield.

Five and a half years later, negotiators will be picking up where they left off. The resumption of the talks has been a critical goal of Spain, which holds the rotating EU presidency until the end of next month. The first round of negotiations will be held in early July, at the latest, said European Council President Herman Von Rompuy.

If agreed, officials say that an EU-Mercosur deal would create one of the largest free trade areas in the world, covering some 750 million people. (In contrast, the North American Free Trade Agreement covers a population of roughly 450 million.)

But many European farmers are less than pleased that the talks will resume, and they have some strong supporters in capitals around Europe. Ten EU member nations - Austria, Cyprus, Finland, France, Greece, Hungary, Ireland, Luxembourg, Poland and Romania - issued a statement this month opposing the resumption of the negotiations. “The strategic agricultural interests of the European Union are clearly at stake,” they said.

France, which has historically been a strong supporter of government protections for European agriculture, appears to be especially sympathetic to farmers’ concerns. Addressing a meeting of the European Commission’s Agriculture and Fisheries Council, French Agriculture Minister Bruno Le Maire pointed out that when the EU-Mercosur talks were launched in 1999, Brussels vowed that the negotiations would move hand in hand with global trade talks at the WTO. The WTO talks are now stalled, with no end in sight to the political impasse, but the Mercosur negotiations have picked back up.

The European Commission says it is entirely justified in resuming negotiations with the South American bloc. “The Commission has a mandate from the member states” to negotiate a deal, noted Antonie Kerwien, a press officer for the Commission, and “the timing question is” is a separate matter. “It’s really just re-opening the talks,” she added. “It doesn’t say anything about when or if they will be concluded.”

Argentine President Cristina Kirchner appeared to have little sympathy for the concerns of the detractor EU member states. “Everyone knows the reason” why some European countries do not want the talks with Mercosur to resume, she said: they “fear for their subsidies.”

“We must tackle the concept of protectionism from all angles,” Kirchner added. “Many think it is tariffs paid in ports. But it is also subsidising production,” she said.

A region-to-region FTA would be a boon for economies on both sides of the Atlantic, officials said, although Mercosur countries would benefit the most. A deal would bring a 10 percent jump in Paraguay’s gross domestic product, a 2.1 percent increase for Uruguay, 1.5 percent for Brazil, 0.5 percent for Argentina and 0.1 percent for the EU, Spanish Prime Minister Jose Luis Rodriguez Zapatero said at the summit. An EU-Mercosur deal would inject a total of US$4.5 billion into the signatories’ economies each year, officials predicted.

EU-Central America trade talks come to a close

The Madrid summit also witnessed the official closing of trade negotiations between the EU and six Central American countries: Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama.

The region-to-region trade talks were launched in 2007 but hit a snag last year thanks to political unrest in Honduras. The EU effectively withdrew from the talks after a military coup in June unseated then-President Manuel Zelaya. But negotiations got back on track after Honduras held a presidential election at the end of November. Since then, the talks have moved apace.

Heads of state signed off on the “trade pillar” of the association agreement between the European Union and a group of Central American countries at a ceremony on 19 May. In a joint statement, leaders said that they had achieved “an ambitious, comprehensive and balanced” outcome.

The trade deal will include “100 percent market opening for industrial products on both sides,” the statement said. The agreement will also allow European cars to enter the Central American countries’ markets free of tariffs over a ten-year period. New quotas will be implemented for trade in beef and rice, allowing more of each product to enter the European Union.

The negotiations have closed, but the proposed deal must overcome several more hurdles before it can take effect - namely, it has to be approved by the European Council, the European Parliament, and legislatures in each of the Central American countries.

“It’s really difficult to say” when the deal might actually take effect, said Kerwien, the Commission press officer. “The first thing the [European] Parliament has to vote on is the Korea deal,” she noted, referring to the free trade agreement with South Korea that has been signed but has yet to be ratified. “Once this has been done, we will see what the general mood is. If all goes well for Korea, I don’t think that there are major problems for Central America,” she said.

The summit also saw the official signing of EU free trade deals with Colombia and Peru. Negotiations on both of those agreements concluded in March.

ICTSD reporting; “EU and Mercosur agree to re-launch trade talks next July,” MERCOPRESS, 18 May 2010; “EU, Mercosur agree to resume free trade talks,” AGENCE-FRANCE PRESSE, 17 May 2010.