The free-trade area is not so much an objective as a fiction. There will not be an agreement at the end of October between the EU and Mercosur, or at least, it won't be a free-trade agreement. I will say it again: if we want the agreement, we will have to reduce our ambitions, because the road to a free-trade zone is impassable. It's not an objective, it's a fiction. The EU cannot countenance free trade in agriculture, and on the other side, the Mercosur countries cannot accept it either in the industrial sector or for anything which, in a unified economic area, brings with it the removal of customs duties and quantitative restrictions, i.e. the opening up of public procurement contracts, services and investments. Instead of throwing accusations of protectionism at each other, each side should understand each other's reasons. For the EU, free trade in agriculture would spell the end of a huge amount of agricultural activity in Europe and death to preferences for ACP countries and other "less developed" countries. On the other hand, what Europe is asking for would mean that Brazil in particular would have to give up a large chunk of their development projects. To entertain this fiction means juggling with WTO rules: transition periods of 17 years or more, setting quotas instead of opening borders, concessions made subject to unacceptable conditions and so on (see, amongst others, our bulletin of 1 October, p.16). The results? Disappointment and frustration, which damage the political atmosphere.
Get rid of the fictive element of the "free-trade zone", and many things become possible. Obviously, developing trade remains a major objective. Legally codified free trade was not needed for the EU to become Mercosur's biggest trade partner; this situation can be further improved and accompanied by progress in many fields of cooperation. The main thing is to be quite clear. If the two large Mercosur countries are only interested in increasing their agricultural exports to the Union whilst continuing to abuse European geographical denominations, that's not progress. I would even go so far as to say that any agricultural offer from the EU should be conditional upon the end of this abuse, not specifically directed at Mercosur, but at all our trade partners. Export subsidies are on their way out, that much is clear; this means that the EU's future sales on the world market will be linked largely to high-quality products bearing the indication of their geographic origin: wines, spirits, cheeses, hams. It is ridiculous that Parma ham cannot be exported as such to Canada, because this denomination… belongs to a local firm which went and registered it! It's not just a trade issue, but one of honesty towards the consumer. On this subject, Brussels described Mercosur's last offer as "provocation", because it was so far from satisfactory (see our bulletin of 29 September, p.13).
The case of ethanol. It was not the Commission which adopted a restrictive attitude. It was the Member States who pull up short each time their specific interests enter the fray. Let's look at the case of ethanol, a bio-fuel derived from sugar. Pascal Lamy thought that Mercosur (in practice, Brazil) could be offered an import quota of a million tonnes a year. Here is his reasoning. Brazil is the world's largest sugar producer, with a colossal competition advantage over Europe: its production costs are around 200 EUR a tonne, the EU's more like 600 EUR. Free trade for this product would spell the end of European production. For this reason, Mr Lamy has suggested moving the offer to a derivative product. In order to set the volume of the quota, he used the Union's objective of reaching a proportion of biofuels in the order of 6% in 2010, which corresponds to around 8 million tonnes, and concluded that importing a million tonnes out of 8 million "does not seem too shocking". But reactions, in France in particular, were virulent and the offer was reduced considerably. All those who crow over the idea of a free-trade zone should take on board the fact that even the quotas (meaning a regime which is far from being a free-trade one) are challenged, whether for sugar, or beef, or other products.
In these negotiations, the EU should take account not only of the vital interests of its agriculture, but also its links with the poorest countries, particularly the ACPs. The "preferential" countries must choose: either they sign up to the notion of the "multi-funcionality" of agriculture, which justifies certain acts of protection and higher prices in the name of environmental, historical and social requirements, and admit the concept for Europe too; or they can align themselves with the countries which call for full liberalisation of agricultural trade, and give up the preferences and other advantages that they currently enjoy, be it for sugar, bananas or whatever else. There is no third option.
(F.R.)