Brasilia, 13/11/2000 (Agence Europe) - The third round of negotiations on the future association and trade liberalisation agreement between the European Union and Mercosur, in Brasilia last week, marked a "turning point", said the head of the European delegation Guy Legras. "The process has now been launched. We have practically completed the information phase and hope to exchange the first text of the commercial aspects of the agreement at the next round, in Brussels in March", said the head of the Mercosur delegation José Alfredo Graca Lima. He considered that the timetable, that provides for starting tariff negotiations in July 2001, should be respected. Other than the change in climate observed on both sides, negotiations allowed for progress on several aspects, but also confirmed that some sectors would raise real problems, especially agricultural subsidies on the European side and public procurement on Mercosur's side.
- Initial results. Negotiators secured initial results on the political and cooperation chapters, as well as the less controversial aspects of the trade chapter. Thus: 1) political dialogue. they reached a consensus on the text of the preamble, the legal framework and several aspects of the institutional structure of the dialogue. they also raised the possibility of engaging in joint international actions; 2) economic cooperation. The first draft texts were presented. The two parties agreed to have an exchange of views at the 4th round on Community programmes that could be the subject of cooperation with Mercosur: innovation programmes for SMEs, statistical cooperation, energy, youth programmes like Socrates, Erasmus, Youth II, Leonardo de Vinci, or cultural programmes like Media II and Culture 2000, as well as the environmental programme Life. As for economic cooperation, they stated their intentions in macroeconomic sectors, industry and investments; 3) commercial chapter. Initial sketches of an agreement were found for dispute settlement issues, and very rapid progress is expected regarding trade defence instruments and general rules of competition. Negotiators also began defining a joint methodology for setting tariff parameters and terms of reference, says a European negotiator.
- Exchange of stances in the field of the negotiations. Following the deadlock in the second round, in Brussels last April, the new session proved to be a "qualitative leap", according to the words of a European negotiator, or a "change of climate", according to a Mercosur negotiator. The dialogue of the deaf seems to have ended and both parties have begun genuinely to exchange their stances. Thanks to "the great deal of progress achieved this week, the technical groups have now covered all sectors and we can already discern the field of negotiations", Mercosur negotiator José Alfredo Graca Lima told EUROPE, while adding that they would now have to see the "level of ambitions" in each sector, as it is here that the difficulties lie. Throughout the week, the EU affirmed that it was prepared to negotiate the opening up of the agricultural markets, but not the question of subsidies. The Mercosur countries, however, did not drop their guard and claimed that this issue would be broached, as "no question is excluded a priori" from negotiations. On the other side, the Europeans do not yet have the assurance of securing more than what Mercosur conceded before the WTO in the field of services, intellectual property and public procurement (see following points).
- Public procurement. José Alfredo Graca Lima told the press that "the question of public procurement lies at the frontier of what must be dealt with by the WTO and what is part of the regional process. Brazil is not a member of the WTO's multilateral agreement on public procurement, but we are aware that the subject will be broached in the framework of the bi-regional negotiating process. Mercosur will not avoid that".
The Brazilian negotiator for issues of public procurement, Fernando Barreto, is, however, less positive: "we are ready to deal with this issue, in the context of comprehensive negotiations, but it will be difficult to go beyond the WTO, as the EU would like", he told EUROPE, identifying four problems: 1) the EU speaks of "public procurement" in general, whereas there should be a distinction made between the sale of State-owned companies in the framework of privatization and public purchases, 2) the EU would like to cover national and sub-national levels, which is impossible for Brazil's and Argentina's federal structures, 3) Mercosur countries are not members of the WTO voluntary agreement on public procurement and "have no intentions of being", 4) the EU mentions among the sectors it would like to have access: telecommunications, energy and transport. Yet the energy sector is managed under …/..
form of concession, and telecommunications and transport have been or are being privatised in Brazil and Argentina, and are now managed by private competing companies (like Telefonica for telecommunications in Brazil for example).
- Services. The Mercosur protocol on 1997 services provides for liberalisation over ten years within the regional group, "the question being that of knowing whether we shall be able to go further with the EU than within Mercosur", remarked one Brazilian negotiator. Nonetheless, "the Mercosur process for integration and association with the EU could converge", assures Mercosur negotiator José Alfredo Graça Lima. According to a European negotiator, the exchange of views on services was "positive", but the question will pose problems in that Article V of the GATS agreements at WTO provides that regional liberalisation in the services sector must cover a "substantial" part of trade. The Europeans hope there will be broader opening mainly in the insurance sectors (where there are limits to the right of establishment), maritime transport ("promising sector", according to the European Commission), and telecommunications (area in full expansion where there is currently an inflow of European investment).
- Intellectual property. The Europeans would like to go further than the WTO agreements. Nonetheless, admits one European source, "the problem is that the TRIPs agreement of the WTO does not provide for regional agreements in this field and concessions should therefore in principle be extended to all". The Mercosur negotiator said "we already have specific multilateral obligations that have been negotiated over many years and it will be difficult to go any further". In addition, he remarked, the "agreement should strike a balance between concessions in terms of market access and non-tariff obligations in intellectual property sectors, but also in terms of protection of investment and of competition".
- Trade disciplines. The EU should conclude bilateral phytosanitary agreements with each of the Mercosur countries, which could be merged in time when Mercosur has established common rules in this respect, stated Brazilian Ambassador in Brussels Clodoaldo Huguenay. The negotiations in this field, in progress for several years now with Argentina in particular, "should be resumed on a new basis", stated one Community source. To offset such agreements advocated by Mercosur, the EU is seeking concessions regarding recognition of names of origin in the wines and spirits sector, which pose problems with the Spanish, among others, for "Rioja" produced in Argentina. Export contracts with Brazil are to begin this week.
- Timetable. The Mercosur negotiators hope decisions may be taken at the second EU/Latin America Summit in Madrid in 2002. Guy Legras nonetheless stressed that these negotiations, which are "highly important for the European Union, will be difficult". He recalled that the Commission's negotiating brief is explicitly linked to negotiations underway at the WTO. This brief provides for negotiations with Mercosur not to be formally concluded before the end of the new multilateral round of talks. While José Alfredo Graça Lima believes that negotiations between the EU and Mercosur and those of the free trade area of the Americas should move forward at the same speed, Guy Legras refused to draw a parallel with the negotiations between the 34 countries of the American continents. Negotiations conducted by the Americans "are no concern of ours", he explained.
