Brazil seeks changes in MERCOSUR rules on tariffs and bilateral negotiations

RIO DE JANEIRO, BRAZIL – Brazil and Uruguay have pressured the other MERCOSUR member countries (Argentina and Paraguay) to relax the bloc’s rules. At a meeting of the bloc’s Foreign Affairs and Economy Ministers yesterday, the Brazilian government, with the support of Uruguay, called for the approval of a proposal to immediately reduce by 10% the common external tariff (TEC) that is levied on imports of products from outside the bloc.

In addition, both countries included on the agenda the granting of a waiver so that each bloc member may negotiate bilateral trade agreements with other nations, not only jointly with all other bloc countries, as is the rule today.

However, Argentina and, possibly, Paraguay, are expected to veto both proposals, which has led the Brazilian government to consider the next steps. According to MERCOSUR rules, all changes must be passed unanimously, and therefore the opposition of one country is enough for the proposal to fail.

This Monday’s meeting is seen by Brazil as decisive. In recent weeks, Minister of Economy Paulo Guedes and Foreign Trade Secretary Roberto Fendt gave statements with an “ultimatum” in which they considered the meeting a deadline for the bloc to start easing these rules.

Should this fail, the countries’ opposition to the two proposals will be considered “formalized” and Brazil will be able to start new actions. The intention is to keep pressing for changes, but within the bloc’s own rules, which may include triggering MERCOSUR’s dispute settlement mechanisms and the use of non-automatic import licenses, which delay trade between countries – a kind of standard operation widely adopted by the Argentines.

The Brazilian government originally wanted more: a 20% reduction in the TEC by the end of this year. Now, however, the assessment is that 10% is what is politically possible at this time.

Decisive moment

On Friday, at an event in the Senate to celebrate MERCOSUR’s 30th anniversary, Economy Minister Paulo Guedes said that Brazil is in a decisive moment to reassess the bloc and advocated the immediate reduction of the TEC. “For Brazil, it is important that we reduce it.”

“We have made a proposal to reduce it by 10%, that is, lower the tariff for a certain product from 30% to 27%. This does not hurt anyone, it serves to send a signal that we are not closing the economy,” he said.

In addition, the possibility of negotiating bilateral tariff agreements is a priority for Brazil, as it would enable, for example, signing a bilateral free trade agreement with the United States, an aspiration of both Guedes and President Jair Bolsonaro.

In late March, Fendt had said that Brazil could not be tied to Argentina and that it sees MERCOSUR as “anachronistic” to the interests of its four members.

Source: Estadão