Bridges Weekly Trade News Digest • Volume 14 • Number 29 • 4th August 2010

Mercosur Establishes Customs Code, At Long Last

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Mercosur, South America’s largest trade bloc, finalised at long last its customs code at the 39th Mercosur Summit in Argentina on Tuesday. The agreement, which took years to establish, now makes Mercosur a genuine customs union and will be phased in over the next year and a half before fully taking effect in 2012.

Much of the final negotiations came down to a tête-à-tête between Argentina President Cristina Fernández de Kirchner and Uruguayan President José Mujica, according to Argentine newspaper La Nación, with Kirchner speaking on behalf of both her country and Mercosur’s two other members, Brazil and Paraguay.

Uruguay has long disagreed with its Mercosur partners over who should have the authority to impose export duties, with Montevideo arguing that the Mercosur bloc should hold that power. Argentina, Brazil, and Paraguay, meanwhile, are all in consensus that each country should apply duties as they see fit. During the meeting, Kirchner convinced Mujica to change his opinion on the subject, despite his concerns over that some Argentine duties could distort trade.

At a more inclusive meeting, Mercosur members also decided to eliminate by 2012 the double recovery of the common external tariff (AEC). Previously, non-Mercosur products were charged a tariff both when they entered the bloc and when they were re-exported to another Mercosur member.

Officials also agreed upon a mechanism for the redistribution of customs revenue among members. These two items were among the last remaining subjects of contention.

In announcing the customs code at a summit press conference, Kirchner lightly rebuked the sceptics who had said that the countries were incapable of consensus. “Everyone expected that this would not work out and said, in block letters, that it was impossible,” she said. She also praised her fellow heads of state for being able to put aside their differences through dialogue and consensus-building, calling this proof that Mercosur is “more than just a customs union,” according to La Nación.

Argentina has held the rotating presidency of the trade bloc for the last six months, a role that Brazil took on at the close of the summit.

Mercosur, Egypt FTA finalised after six years of talks

The Mercosur summit, which took place in San Juan, Argentina on Monday and Tuesday of this week, also saw officials sign the union’s second-ever FTA when it finalised a deal to open up trade with Egypt, Africa’s second-largest economy.

The pact, which took six years to finalise, will immediately eliminate tariffs on butter, maize, metals, oils, valves, and wheat. Duties on milk and industrial products will be phased out within the next four years, while tariffs on the remaining products covered by the deal will be removed over a period of either eight or ten years.

Most of the US$2.268 billion worth of commerce between Egypt and the four Mercosur countries - Argentina, Brazil, Paraguay and Uruguay - comes from Egypt’s trade with Brazil. The South American country imports approximately US$87.7 million worth of goods from Egypt, and exports US$1.44 billion in return, according to Spanish-language news agency EFE.

Argentina is Egypt’s second-largest Mercosur partner, exporting US$603 million worth of goods to the North African nation and importing US$53.2 million. The value of Egypt’s trade with Uruguay and Paraguay is substantially smaller.

Argentine Industry Minister Débora Giorgi lauded the benefits that her country would reap as a result of the pact, asserting that “Argentina will be able to sell more primary products and in better [trading] conditions in comparison with what it currently exports to Egypt,” according to La Nación.

Speaking more broadly, Giorgi also noted that the pact will provide Mercosur with the opportunity to export products that it currently does not sell to its new North African partner. These products could include vehicles, automobile parts, pharmaceuticals, and chicken, among others.

Egyptian Minister of Trade Rachid Mohamed Rachid referred to the FTA signing as a “historic moment,” given that Egypt “is the first Arab and African country to sign such an agreement,” according to Egyptian newspaper Al-Ahram. He also projected that the pact could lead to a doubling of trade exchanges between Egypt and Mercosur.
The agreement might also allow Argentina to make inroads into the Egyptian wheat market. Egypt is the world’s largest importer of the product, according to Reuters, while Argentina is one of its major exporters. Though Argentina did not export wheat to Egypt last year, that could change with the signing of this deal.

The Mercosur trade bloc is negotiating similar agreements with Jordan, Morocco, and the Gulf Cooperation Council (GCC) - a six-member union that includes Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates.

Summit attendees also addressed the issue of setting up a trade and cooperation agreement with the EU. The two parties re-launched talks in May, despite some pushback from EU member states who fear their farming sectors would suffer from increased competition with South American producers. The foreign affairs ministers from Mercosur’s four member countries said they hoped the EU would agree to Mercosur’s latest offer and accelerate progress toward an agreement.

Mercosur summit an overall success, despite Venezuela-Colombia distraction

While the customs code and the Mercosur-Egypt FTA were viewed as the main successes of the gathering, progress was also made in other areas - in spite of growing concerns over the tensions building between Venezuela and Colombia.

Venezuela signed a Mercosur membership agreement in 2006, but Paraguay’s legislature has not yet ratified the document. (Lawmakers in the other three Mercosur countries have approved it.) Bolivia, Chile, Colombia, Ecuador and Peru are “associate” members of the bloc; heads of state from those countries usually attend Mercosur summits.

Venezuelan President Hugo Chávez is also a regular attendee of the trade bloc’s gatherings, but in a surprise last-minute move he cancelled his trip to this week’s summit in Argentina. Colombian President Álvaro Uribe was also absent. Venezuela recently broke off diplomatic relations with Colombia after the latter alleged that it was under attack from rebels trained or funded by its neighbour.

ICTSD reporting; “Mercosur y Egipto buscan cerrar un tratado de libre comercio,” AGENCIA EFE, 15 July 2010; “Rachid signs free trade agreement to secure our agricultural imports,” AL-AHRAM, 4 August 2010; “Hugo Chávez pegó un sorpresivo faltazo a la cumbre del Mercosur,” EL CLARÍN, 3 August 2010; “Tras arduas negociaciones, aprobaron un código aduanero común para el Mercosur,” EL CLARÍN, 3 August 2010; “Acuerdan un nuevo código del Mercosur,” LA NACIÓN, 4 August 2010; “El Gobierno evalúa compensaciones,” LA NACIÓN, 3 August 2010; “Mercosur acuerda libre comercio con Egipto,” LA REPÚBLICA, 2 August 2010; “Mercosur Advances Toward True Customs Union,” LATIN AMERICAN HERALD TRIBUNE, 3 August 2010; “Mercosur expects the EU to match the latest offer for a trade agreement,” MERCOPRESS, 3 August 2010; “Mercosur signs trade accord with Egypt; Venezuela/Colombia conflict out of the agenda,” 3 August 2010, MERCOPRESS; “Mercosur bloc signs free-trade deal with Egypt,” REUTERS, 3 August 2010; “Bloque Mercosur acuerda libre comercio con Egipto,” REUTERS, 2 August 2010.

One response to “Mercosur Establishes Customs Code, At Long Last”

Dr. Salvador Rivera, Ph.D 5th August 2010 at 14:58
The New Customs Code is long overdue as the article suggests. It is also an overnight success, as evinced by the announcement of the German Foreign Minister Guido Westerwelle who has initiated a new Latin American investment strategy for his country. Other powerful states are bound to follow, providng badly needed capital, technical resources and employment. Only the most retrograde sectors of Latin America continue to stymie MERCOSUR.
Professor Dr. Salvador Rivera, Ph.D
History and Sociology
State University of New York