Former Brazilian presidents Fernando Henrique Cardoso and Lula da Silva signed a statement in which they support Argentina's position in the Mercosur controversy regarding a flat unilateral tariff reduction as sponsored by president Jair Bolsonaro, with the backing of Uruguay, but rejected by President Alberto Fernandez.
We agree with the position of Argentine president, Alberto Fernandez: this is no moment for Mercosur to consider unilateral tariff reductions without any reciprocal benefit for the block's exports, stated the leaders in the release.
They added that we also agree that it is necessary to ensure the integrity of the block, so that all its members can fully develop their industrial and technological capacities and participate in a dynamic and creative way in the current global economy.
The release is politically most significant since it marks the coincidence of Cardoso and Lula who recently retook an interrupted dialogue following decades of electoral competition. Since 1994 the two leaders have disputed elections in opposite sides, be it as candidates or supporting members of their parties.
In May the two leaders met at the house of a former member of the Supreme Federal Tribunal, Nelson Jobim, and confirmed reconciliation with a photo shaking hands, and anticipating an accord to remove Bolsonaro from the Brazilian presidency in 2022.
The proposal to apply a 20% reduction to Mercosur's Common External Tariff, (AEC) is the brain child of Bolsonaro's Chicago educated Economy minister Paulo Guedes, but industrialists both in Argentina and Brazil fear a flood of imports from China and Asia in general.
Since taking office Guedes and Bolsonaro have been lobbying strongly for a lower external tariff of the block, while Uruguay is pushing for a more flexible scheme, which would enable it to establish direct bilateral trade negotiations with other countries or/and blocks. Under Mercosur rules all decisions must be unanimous.
Argentina on the other hand and some Brazilian manufacturing leaders want to shield certain sensitive and strategic sectors and disagree with a flat tariff reduction.
Because of this discrepancy, a summit of Mercosur Foreign and Economy ministers to address the issue in Buenos Aires scheduled for next Tuesday, June 8, has been postponed for the following week.
Apparently Argentina is willing to accept a lower tariff reduction, but not 20%, starting in January 2022, and admits a basket of 1,893 industry input items with maximum tariffs ranging up to 2%, as long as they are not manufactured in the country.