MercoPress. South Atlantic News Agency

EU/Mercosur agreement: “too much fear from both sides”

A trade agreement between Mercosur and the European Union would significantly expand European investment given the increase in bilateral trade, but ‘there’s too much fear from both sides’, according to Adrian van den Hover head of international relations for Business Europe.

“In Argentina and Brazil industries are rushing to defend themselves from the opening to Europe, but nothing bad is going to happen because many of the European industrial investments are in those counties and they won’t want to shoot their feet”, said van den Hover in support of his argument.

However he admitted that the EU is very much concerned with Chinese competition in Mercosur and “an agreement with the South American block would help us to retain our bilateral trade relation”.

The EU/Mercosur trade understanding is a far reaching association agreement which includes a political dialogue chapter and one on cooperation, an area where the EU so far has not axed funds. But the governments of Spain and Italy have eliminated cooperation aid for NGO in mid-income per capita, such would be the case of Argentina and Uruguay.

Any trade agreement between EU and Mercosur needs legislative approval from the two sides and member countries, plus the European parliament. Precisely, only a few weeks ago the EU parliament Agriculture Committee under strong pressure from farm lobbies passed a resolution calling on the European Commission to freeze trade talks with Mercosur given the threats it poses for European farmers (protected with high tariffs and subsidies).

The motion did not prosper on the floor but nevertheless shows the hostility towards a treaty which would not eliminate financial support to EU farmers but would considerably increase competition from more efficient Mercosur meats and dairy produce.

Nevertheless the European Commission is working on a reform to the Special Preferences System, SGP, which would reduce or eliminate tariffs on certain non traditional imports from developing countries.

The proposal has been put to consideration of the Council of Europe and the EU Parliament and basically wants to reduce the number of beneficiary countries from 126 to 80. The system is renewable every three years when the EC is entitled to introduce minor changes. The last time was 2010, and plans are for the reforms to be introduced 2013, effective 2014.

If the proposals are finally agreed and passed, countries such as Argentina and Uruguay, possibly Brazil which are considered mid income according to World Bank stats would cease to enjoy such benefits.

EC officials have been quick to point out that the SGP initiative is not linked to a “protectionist” attempt by the EU in times of crisis.

“SGP is renewed every three years but now the EU is demanding it be approved by the Council and Parliament, which means a 16-month process. So we are looking for a definitive system and this has nothing to do with the current crisis”, said a top EC official.

“We have all agreed that we need to help poor countries; we are not protectionists and proof of this is that we have been commencing talks every two weeks. Given the crisis we push for new negotiation rounds. If Mercosur and the EU finally reach an agreement, Argentina, Uruguay and Brazil would not loose their preferences but rather would see them considerably increased”.

Currently the EU is holding trade negotiations not only with Mercosur but with Korea, Canada and the Asean countries from Asia, and in some cases it has not been easy going with some of them, such is the case of India.

“I think the idea is not so much awarding benefits unilaterally to emerging countries, but rather discuss agreements with blocks”, said van den Hoven.