Brussels, 30/10/2001 (Agence Europe) - On Monday, MERCOSUR made an offer in the framework of the negotiations over an Association Agreement and Free Trade Agreement with the EU and the four MERCOSUR countries (Argentina, Brazil, Uruguay and Paraguay) to abolish tariffs that currently cover around 33% of industrial imports from the EU and 40% of agricultural imports. The offer covers a total of $7.5 billion worth of imports (from the annual total of EUR 22.4 billion). In terms of services and public procurement, MERCOSUR pointed out that its offer greatly converged with the EU proposal of July 2001. In a press release, it stressed that the ultimate objective was to set up a Free Trade Zone with the EU that would cover all products, adding that for the other products, the time periods and details of how trade would be liberalised would be decided at a later date, during the liberalisation process itself.
The Europeans gave a distinctly frosty welcome to the offer, noting that it did not cover most industrial goods, but that MERCOSUR was asking for a lot in terms of agriculture. EU diplomats did however, recognise a parte that it was difficult to obtain much more than that given MERCOSUR's internal problems - Argentina is preparing to launch a painful economic restructuring plan under pressure from the IMF, and statements made by the Argentine Economics Minister last week about Brazil's trade policy have led to a suspension of bilateral trade between the two MERCOSUR heavyweights. The chief MERCOSUR negotiator (and Deputy Foreign Minister of Uruguay) Guillermo Valles, stressed the "political aspect" of the proposals when speaking to journalists on Monday that "demonstrated MERCOSUR's political interest in the negotiations over the inter-regional association". He also pointed out that the offer covered ad valorum rights, MERCOSUR's only trade defence instrument, although the EU's offer of last July covered 100% of industrial products and 90% of agricultural products in theory but does not take into account the specific duties imposed by the EU. A MERCOSUR diplomat explained that MERCOSUR did not share the EU's view that its offer covered 90% of trade.
For industry, MERCOSUR is currently proposing to remove ad valorum customs duties over a period of ten years for five product categories as follows: 1) total liberalisation when the agreement comes into force for 8.7% of EU exports to the MERCOSUR area (taking 1998/2000 as the reference period), which is equivalent to $2 billion; 2) liberalisation over an eight-year time period for 5% of products, or around $1.1 billion; 3) liberalisation over ten years of 19.4% of imports, or $4.4 billion. The offer covers, inter alia, mechanical and electrical equipment of a value of $3.4 billion per year; chemicals and pharmaceutical products ($2 billion); transport equipment ($738 million); and optical instruments and equipment ($533 million). Cars (one of the EU priority areas) do not appear to be included.
For agriculture, around 40% of the EU's exports will be covered, signalled the MERCOSUR negotiator without giving any indication of the products concerned. In terms of demands, however, MERCOSUR is expected in the 6th round of negotiations (that ends on Wednesday) to insist on the EU scrapping agricultural export subsidies that will benefit from preferential MERCOSUR tariffs, and demand compensation for the export of products that benefit from subsidies within the European market.
For services, the MERCOSUR press release indicated that MERCOSUR presented a counter-proposal which significantly converged with the text put forward by the EU, adding that both sides agreed that the next services chapter had to be based on GATS principles like national processing, access to markets, supply modes, transparency, mutual recognition and national regulations. A MERCOSUR diplomat signalled that it was a matter of setting the legal framework without entering into the specificities of each sector. Argentina's economic crisis appears to be putting a brake on any further progress. The EU are seeking an opening in the insurance sector, shipping and telecommunications.
For public procurement, MERCOSUR presented a counter-proposal that coincides with many points of the proposal presented by the EU in July, particularly the basic principle of guaranteeing national processing for companies on both sides that answer calls for tender, stated MERCOSUR, adding that while it had not yet decided on its internal rules on public procurement, and its members are not party to the WTO agreement on public procurement, but the fact that it had made a counter-proposal demonstrated its political determination to reach an agreement.