Mercosur and EU Near Agreement

By Jaylan Boyle, Senior Contributing Reporter

RIO DE JANEIRO – Mercosur, South America’s co-operative trade organization, and the European Union (EU) could forge an historic trade alliance as early as May of this year according to some sources. However there remains a key issue confronting the two parties: agricultural subsidies that the developed world pays to domestic producers, inhibiting the ability of other nations to compete in an open market.

At recent talks between Brazil and the EU, Brazil’s foreign minister Celso Amorim seemed to suggest that while Mercosur is unlikely to back down from it’s position of calling for limitations to the subsidization programs of the EU and US, the organization would be prepared to set the issue aside in the interests of hammering out a general outline for a Free Trade Agreement (FTA).

“I think a deal could be reached. I don’t know if it will be a final agreement but I think we can sign an agreement that is not simply a political declaration.” said Minister Amorim.

The forthcoming May summit attended by EU member countries and South American states has been alluded to as the probable venue for negotiations to begin moving meaningfully forward. The summit is to be hosted by Spain, who currently holds the EU presidency.

Amorim also said that changes to trade patterns on a global scale made an agreement between the two blocs more desirable than ever, and that this dictated that both parties should pursue the matter with a more flexible approach. The EU recognizes Brazil primarily, and therefore the entire Mercosur bloc, to be a significant partner in the future, due to it’s rapid recent development and increasing influence throughout the world under President Luis Inacio da Silva. The European Union is Brazil’s largest trading partner and has invested heavily in South America in recent times.

Both trading blocs have been working on reaching an accord for more than ten years, however in 2006 talks reached an impasse, and the latest joint statements by representatives of both parties are the first positive steps toward agreement since then.

This commitment to move forward is in sharp contrast to the pessimism that mired the recent round of trade talks held in Qatar’s capital Doha, which was formed around the express purpose of assisting poorer nations to become competitive in the global market place.

Mercosur (a contraction of the Portuguese phrase Mercado Comum do Sul, or Southern Common Market), is a Regional Trade Agreement (RTA) consisting of full members Brazil, Argentina, Paraguay and Uruguay. Bolivia, Chile, Peru Columbia and Ecuador all hold associate member status, with Venezuela’s application yet to be fully ratified. Mercosur as a notional endeavour was first mooted in 1985, and became a reality in 1991 with the signing of the Treaty of Asuncion.

For the full picture, see our Mercosur EU Trade Deal: Complete Guide.