Mercosur welcomes trade talks mandate

Date: 24/06/1999

By Gareth Harding
MERCOSUR countries have welcomed this week's agreement by EU foreign ministers to give the European Commission a mandate to kick off free-trade talks with Latin America's most powerful trade grouping.

Brazilian Foreign Minister Luiz Felipe Lampreia said the deal struck at a meeting in Luxembourg was of "great importance in bringing together the positions of our two blocs", whilst another Mercosur source hailed the agreement as a "positive step" towards launching negotiations.

Officials from both sides had feared that differences between EU countries over how far and fast to open up their markets would delay the start of talks and sour next Monday's (28 June) summit between the two blocs in Rio de Janeiro.

At the last meeting of Union foreign ministers in May, France insisted that talks on liberalising trade in products and services should be delayed until the next round of World Trade Organisation negotiations ends, probably in 2003.

But in a last-minute compromise deal, ministers agreed to start talks on removing non-tariff trade barriers between the two blocs immediately and postpone any discussion of tariff cuts until July 2001.

Largely at France's behest, EU governments failed to set a date for completing the free-trade talks, merely stating that they should be wrapped up after the conclusion of the WTO's Millennium Round. Mercosur countries have set themselves the target of concluding the talks by 2005, a goal supported by member states such as Spain and Italy.

Paris is particularly concerned that EU countries will be flooded with farm produce from the agriculture-rich states of the southern cone. But Mercosur, which groups together South America's two biggest economies - Brazil and Argentina - with Uruguay and Paraguay, argues that there can be no free-trade deal until the Union fully opens up its heavily subsidised farm markets to outside competition.

"Agriculture constitutes an essential part of our economies, and thus the negotiations must entail the liberalisation of all trade without exceptions," stated the four Mercosur presidents after a recent meeting in Paraguay.

The bloc has also warned that if the EU drags its feet on market-opening, it will be pushed into the arms of North American countries which are currently negotiating a free-trade agreement with their southern neighbours. This would have a damaging impact on European firms, which are currently the largest investors in the €1-trillion Mercosur market.

The latest figures from the Commission show that EU-based companies ploughed over €6 billion into the region in 1997, an increase of 65% on the previous year.

Acting External Relations Commissioner Manuel Marín warned recently that "if we do not know how to take advantage of the space and opportunities offered through cooperation with Latin American countries, others undoubtedly will".