MercoPress. South Atlantic News Agency

FTAA short term costs “too high” for Mercosur

Mercosur members would be in disadvantage if the Free Trade Areas of the Americas, FTAA, project became effective in the current conditions, alleges a report from the Argentine economic consultant Ecolatina released this week.

Although admitting Mercosur outside FTAA would also face a "non favourable situation", since the block would be excluded form the preferential tariffs agreement, Ecolatina believes that for the South American block a reduction of United States farm subsidies is a sine qua non condition to fully take advantage of hemispheric integration. Hence, Mercosur reluctance to advance FTAA negotiations under current circumstances, says Ecolatina.

The report insists that the costs of an FTAA integration are "too high in the short term" for Mercosur, with the greatest impact on the labour and knowledge intense sectors. In the case of Argentina, and in the event of FTAA, one of the threats for local industry "would be the loss of preferential access to the Brazilian market".

The report indicates that 43% of this year's 1,4 billion US dollars Argentine technological-scientific exports are geared to Mercosur.

Besides, farm subsidies in several FTAA countries would considerably reduce Argentina's competitive edge. For example this year United States is granting farmers 20,3 billion US dollars in subsidies which is almost equivalent to half of Argentina's agriculture exports.

"Most countries which support FTAA already have free trade agreements with United States or are in the process of negotiations, which mean integration costs would be lesser that for Mercosur, highlights the Ecolatina report.

One of the original founders of Ecolatina consultants was Roberto Lavagna, currently Argentina's Economy minister