The EU and the Mercosur countries (Argentina, Brazil, Paraguay and Uruguay) are engaged in intense discussions, both at the political and technical level, on the sidelines of the 11th WTO ministerial conference (Buenos Aires on 10-13 December) with the objective of paving the way for a political agreement – at best, this week or before Christmas, and at worst in early -2018.
"Progress has been significant over recent weeks (but) questions on agriculture and automobiles are still under discussion", Brazil's President Michel Temer stated, who was in Buenos Aires for the inaugural session of the WTO conference on Sunday 10 December.
"This negotiation has lasted over 20 years. It has made a lot of progress and it is likely that by 21 December we can go further, at least up to a political agreement", Temer continued, but nevertheless giving assurances that "if an agreement was not concluded now, it surely would be then".
Brazil's foreign minister, Aloysio Nunes, said there remained "many technical problems to resolve", especially on the lifting of Brazil's non-tariff barriers (upon which the EU insists).
Currently chairing the rotating presidency of Mercosur, Brazil would like to be able to announce a political agreement with the EU at a summit of the Latin-American bloc in Brasilia on 21 December, and to which it would invite an EU representative, a Brazilian source told EUROPE.
Meanwhile, Mauricio Macri's Argentina is very committed to the liberalisation of world trade and would like the announcement of a possible political agreement to prevail this week.
Under pressure from the member states, the EU does not want to hurry things and does not rule out prolonging the talks to early 2018, with the objective of sealing an an agreement in principle before the possible resignation, in March, of the Brazilian government before the general elections in the country in October.
It is therefore more likely that European Trade Commissioner Cecilia Malmström and her Mercosur counterparts, who met on Sunday, will only agree on a statement of intent in Buenos Aires this week, confirming their commitment to concluding an agreement.
In the meantime, discussions are still stumbling on market access offers for agricultural and industrial products, services and public procurement.
The EU, Mercosur and Brazil are not happy with the improved offers on market access that were tabled at the sixth round of negotiations in Brussels on 28 November to 8 December, several sources have said.
Brazil criticises the EU for not proposing bigger concessions on beef and ethanol in its last revised offer (see EUROPE 11921). This last revised offer provides for tariff rate quotas for sensitive agricultural products including 70,000 tonnes of beef, 600,000 tonnes of ethanol, 100,000 tonnes of sugar for refining and 2,000 tonnes of other sugars.
Brazil insists on obtaining a quota of 100,000 tonnes of beef. It also wants a zero tariff for the sugar quota, while the EU proposes a tariff of €98 per tonne, a Brazilian source states.
In a tactical response, the EU is not closing the door on the improvement of its offer on beef and ethanol, but this would only come in the end game.
The EU deplores the fact that Mercosur's revised tariff offer, in terms of tariff lines and volumes, only stands at 89% of liberalisation for its market without tariff rate quotas, compared with the 90% that was expected – while the EU will offer 92% tariff liberalisation.
The EU also insists on a major Mercosur market access concession on industrial products, particularly for automobiles. The key figure would be that Brazil agrees to reduce its tax on car imports from 35% to 2.66% over a transitional period of 15 years.
Whilst the EU and Brazil play cat and mouse, Argentina is "ready to let go on everything", a South American source told EUROPE. To the extent that the Brazilians are obliged to temper Argentinian enthusiasm, especially on wine, where Brazil wants bigger protection than that wanted by its neighbour, the world's sixth biggest producer, a source told EUROPE. (Original version in French by Emmanuel Hagry)