Dr Charles Tannock

Member of the European Parliament for London

Negotiations between the European Union and Mercosur

Delivered in Plenary - May 9th 2005

It gives me great pleasure to speak on behalf of my Group, and I pay especial tribute to the work of my colleague, Mr Salafranca Sánchez-Neyra, who is unable to be present tonight, and who is a renowned expert on EU-Latin America trade and political relations.

At times, it is very difficult for someone such as myself, interested in global trade patterns, to monitor the number of different bilateral and multilateral trade negotiations going on all the time outside the framework of the Doha Round of the WTO – which, I hope, will ultimately make such biregional deals redundant in the future.

Currently, in Latin America the EU has successful free-trade agreements with Chile, in the shape of an association agreement – which also enables additional close political cooperation and key human rights and democracy commitments by both parties – but also a similar agreement with Mexico. However, being itself from inception a regional customs union, it makes sense for the EU, wherever possible, to negotiate with other multilateral customs unions elsewhere in the world and to draw up regional free-trade agreements in preference to a whole series of bilateral agreements.

One such major bloc is Mercosur, consisting of four Latin American countries – Brazil, Argentina, Uruguay and Paraguay – with Chile and Bolivia having associative status. Mercosur’s fortunes have waxed and waned in recent years over the imbalances in trade between Argentina and Brazil in particular – a matter constantly under criticism from Argentina, which last September proposed to Brazil a safeguard clause to which Brazil refuses to agree. Mercosur has traditionally been designed to deal in trade between the large industrial conglomerates, not the SMEs in the region, which feel disadvantaged by this deal.

Argentina also objects to the confusion over the Brazilian initiative last December to create a South American community of nations, which was important recently in supporting Brazil’s role in stabilising Ecuador, as Argentina believes that Mercosur needs to be reinforced before that happens.

There is also the tricky issue of the desire of Portuguese-speaking Brazil to have a seat on the UN Security Council to enhance its regional superpower political ambitions. Argentina instead suggests the seat could rotate to give room for all the South American countries, mainly Spanish-speaking, to express their opinions.

Last year, Mercosur had problems negotiating a deal with the EU – particularly because, Mercosur alleged, Pascal Lamy, the then Commissioner, came from France, which is amongst the most protectionist of countries in terms of agriculture – chiefly regarding Mercosur’s desire to gain access for its agricultural products, which our EU farming sector finds threatening. Brazil is a huge soya bean producer and Argentina a producer of wheat and beef, as well as of fresh fruits, etc. In turn, Mercosur is unhappy about giving tariff-free access to EU industrial goods, as Brazil, in particular, is highly developed in the heavy industry sector. Curiously, Mercosur is simultaneously negotiating with countries like South Korea and with other multilateral blocs, like the proposed agreement this week with the Gulf Cooperation Council, as the leaders of Latin America are meeting tomorrow in Brasilia with the Heads of Government of the Arab League.

There can be no doubt that President Lula da Silva of Brazil and President Kirchner of Argentina are still jostling for power to see who is perceived as the principal interlocutor with the United States of America ahead of President Bush’s visit.

Mercosur appears still to hope that the Free Trade Area of the Americas will come to pass even though the USA has little appetite for it, preferring instead advantageous bilateral deals with individual Latin American republics, as it already has a very successful and cosy set-up in NAFTA with Mexico and Canada.

As I have outlined, the situation is complex, and I disagree with the recent allegations from Mr D’Alema on the other side of the House, who accuses Commissioner Mandelson, who I believe will be the main player in the negotiations, of lack of interest in the region or in securing a deal. I look forward to hearing how Commissioner Mandelson will bring this project forward after the breakdown last October, as it would appear to me there is no real political will on Mercosur’s side. I would be interested to have a fuller explanation from the Commissioner on how we could bring them back to the negotiating table.