MercoPress. South Atlantic News Agency

Uruguay chair of Mercosur, targets accord with China, exhausted of negotiations with the EU

Nin Novoa fears negotiations with EU could temporarily “breakdown”, although he anticipated he was committed to avoid such a situation.

Uruguay will be handed the rotating chair of Mercosur this Monday in a brief summit ceremony to take place in Paraguay. Attending will be Brazil's Michel Temer, Uruguay's Tabare Vázquez, the host Paraguay Horacio Cartes and in representation of Argentina, vice president Gabriela Michetti. President Mauricio Macri is in the midst of a cabinet reshuffle and waiting for market reaction this Monday following the naming of a new Central Bank chairman.

 Even when Venezuela remains suspended and the humanitarian crisis to which the Venezuelan people are exposed by the regime of President Nicolas Maduro is an issue of standing concern, Mercosur leaders overall are not satisfied since expectations are far from having been achieved. In effect the much announced and definitive free trade and cooperation accord with the European Union remains in the drawing board.

“Never was Mercosur more prepared to close the deal. The political and cooperation chapters are practically concluded but despite the political willingness and technical efforts completed we have yet to seal the trade negotiations” regretted Uruguay's foreign minister Rodolfo Nin Novoa, who will be leading Mercosur negotiations from next July first to the end of December.

Nin Novoa went further and said he feared that negotiations with EU could temporarily “breakdown”, although he anticipated he was committed to avoid such a situation. “Difficulties which were absent from the original agenda have emerged. I can't imagine why minor details referred to origin names could impede an accord of this magnitude”, underlined the Uruguayan official.

Nevertheless Nin Novoa said that Mercosur under the Uruguayan presidency will attempt a trade understanding with China and with the countries of Euroasia (Russia, Armenia, Byelorussia and Kazakhstan). In effect these countries are very much interested in beginning a negotiation process with Mercosur.

Nin Novoa also recalled the significance of China for Mercosur, (main trading partner of Argentina, Brazil and Uruguay), and in the urgent need to have Chinese tariffs reduced, particularly for agriculture produce, currently 14.8%, while Beijing has free trade accords with “direct competitors” New Zealand and Chile, so insisted Nin Novoa “we need a strategic discussion” on how the block approaches China.

Likewise the more dynamic Pacific Alliance was also in the agenda, “and we are working for a block to block agreement; we are advancing gradually to a possible association with Mercosur, but it is a matter of time” reported Luis Fernando Avalos, Paraguayan Integration deputy minister.

On Saturday and Sunday, Mercosur foreign and economy ministers together with Central banks' chairpersons held a round of technical discussions on the agenda and to prepare the Monday summit. It was during these discussions that Uruguay again brought up the issue of Mercosur common external tariff, AEC, which it wants to be modified, given the changes “in the world, the region and our member countries, which have been very significant and deep”.

“The review of AEC is functional to an open regional strategy which is supported by our country”, said Uruguay Economy minister Danilo Astori. In other words Uruguay, and Paraguay, favor a more flexible and less conditioned common external tariff, which mainly Brazil is reluctant to accept. Uruguay is anxious to reach a trade accord with Beijing since China has become its main market for beef, wool and growing for dairy, but lacking this tool means paying some 200 million dollars in tariffs.

Brazil is not willing to such an accord since it fears its manufacturing simply can't compete with China and in the case of the EU, the problem more than farm produce, or origin trademark names, is really the Brazilian auto industry, which again does not seem to have the muscle to challenge China. In this chapter the Argentine auto parts industry, provider of Brazil, is a silent witness. A compromise was reached with the creation of a group that will attempt to facilitate trade and customs paperwork, and promote international trade deals.

Finally the summit is expected to ratify the suspension of Venezuela, since, as the outgoing Paraguayan foreign minister Eladio Loizaga said “Mercosur promotes democratic values so we can establish trade agreements with all countries of the world”. He added, “we are no longer an ideological block, we're back to our roots, a dynamic block committed to open markets, attracting investments and creating jobs for our people, in the framework of solid democratic institutions”.