Brazil Summit Could Push Mercosur-EU FTA
Talks beginning tomorrow in the Brazilian capital of Brasilia will tell whether the South American trading bloc Mercosur will be proceeding in earnest with free-trade talks with the European Union.
Talks between the two entities—two of the three largest trading blocs in the world—have been ongoing since 2010.
The major impediment to progress in the talks has been dissension within the Mercosur ranks. Mercosur—comprising Argentina, Brazil, Venezuela, Uruguay, and Paraguay as full members and Colombia, Bolivia, Chile, Ecuador, and Peru as associate members—was formed in 1991. Mercosur’s legacy has been a commitment to regional integration more so than free trade. Some Mercosur members, most notably Venezuela and Argentina, have articulated protectionist trade policies.
Venezuela and Argentina are on record resisting an influx of EU imports, fearing for their domestic industries. Uruguay, by constrast, has been commited to free trade and has pushed to revise Mercosur law which requires free trade agreements to be neotiated as a bloc.
Brazil, the largest economy in Mercosur, with a GDP of $2.35 trillion, has resisted Uruguay’s proposals. But an economic slowdown—zero growth in 2014 and an expected one-percent contraction in 2015— has led Brazil to reconsider. The government’s new economic program has set an expansion of exports as a major priority for regaining economic health. Brazil’s president Dilma Rousseff announced last month that the speedy conclusion of an EU deal was a priority for Brazil.
The Mercosur summit being held July 16 and 17 in Brazil could give the green light to final negotiations on an agreement.
The first step would be for Mercosur members to develop a tarif-reduction list agreeable to all parties and exchange that with the EU’s list. If talks go forward, that could happen later this year. In the interim, presidential elections will be held in Argentina, and, depending on who wins, Argentinian relectance to join the agreement may have dissipated by that time.
An exchange of offers on tariffs would jump-start negotiations between Mercosur and the European Union. But closing the deal could not come until it was approved by the parliaments of the individual countries invovled. If everything else goes well, that may take as long as a year.
Peter Buxbaum is web editor of Global Trade.