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Mercusor talks

30 November 2001

During EU Agriculture Commissioner Fischler's visit to Mercusor countries (Brazil, Argentina, Paraguay and Uruguay) in October 2001 a number of issues were raised which provide important insights into the likely scope of any ACP-EU economic partnership agreement negotiations. While the main aim of the visit was to build momentum for successful agricultural negotiations at the WTO, a secondary aim was to encourage progress in the bilateral free trade area talks between the EU and Mercusor.
In July 2001 the EU had tabled a tariff reduction offer in the context of EU-Mercusor free trade area negotiations which, amongst other things, would lead to the introduction of duty free access for 90% of Mercusor's current agricultural exports to the EU (up from 60% duty free access currently). There has been considerable growth in EU-Mercusor trade since 1997 with the bulk of Mercusor exports being agricultural products.
Speaking in Argentina, Commissioner Fischler highlighted how initially "Mercusor seemed to be heading for a long conceptual debate about Europe's Common Agricultural Policy, and repeatedly addressed EU subsidies and market support issues as a pre-condition to the launch of tariff negotiations". Significantly he pointed out how, from the EU's perspective, "free trade agreements are essentially about tariffs and other matters directly related to trade. They never include talks on domestic agricultural support or subsidies." Fischler made it clear that issues related to domestic agricultural support and subsidies should be addressed through the multilateral WTO process.
For Mercusor, access to the EU agricultural markets has always been seen as the key issue in any free trade area agreement with the EU. For their part the EU is less enthusiastic about simply opening up agricultural markets and is looking for concessions from Mercusor on government procurement, services, industrial goods, intellectual property and wines and spirits, as well as closer co-operation on food safety issues.
In discussions in Mercusor countries, Fischler highlighted the "quiet revolution" which has taken place in EU agricultural policy. The emphasis is very much on promoting the competitiveness of EU agricultural exports by moving from price support to systems of de-coupled direct aid. Fischler complained that this fundamental change in the CAP is not being recognized internationally. This formed part of an appeal for the abandonment of "extreme positions" and the adoption of "constructive" approaches to agricultural issues in the WTO.

Editorial comment

A number of issues arise for ACP countries from the EU's policy towards Mercusor. Any improvement in access for Mercusor exports to the EU is likely to erode the margins of preference currently enjoyed by ACP countries. The major products currently exported from the Mercusor countries include: oilseeds, coffee, orange juice, tobacco, meat, fruit and nuts.
The EU is open to further liberalization of its tariff arrangements with Mercusor countries since the process of CAP reform is leading to a reduction in the need for tariff protection, as EU prices fall towards world market price levels.
Commissioner Fischler's explicit ruling out of any discussion of CAP issues within free trade area talks is particularly significant for ACP countries, since the issue of the impact of CAP programmes on the competitiveness of EU agricultural and processed agricultural exports to ACP countries is likely to be a central issue under any moves towards free trade. The fact that Commissioner Fischler highlighted the importance of addressing agricultural support issues in the WTO, whilst at the same time criticizing as "extreme" those countries who wish to see these issues comprehensively addressed in any new round, does not bode well for the ACP in terms of seeing issues of CAP distortions addressed under any moves towards free trade with the EU.
The range of issues (government procurement services etc) under discussion between the EU and Mercusor countries are indicative of the likely scope of any EU-ACP trade negotiations under the EU's proposed economic partnership agreement approach.

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