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Brazzil - Economy - August 2004

Brazil: Impasse Between EU and Mercosur

Representatives of the Mercosur and the European Union are
feeling frustrated after negotiations between the two economic
groups broke up. The expectation of a week of intense debate
ended up not coming true. The meeting terminated ahead of
schedule. The next meetings are set to take place in September.

Ana Paula Ferrari


Picture The three-day meeting between representatives of the Mercosur and the European Union (EU) to discuss the creation of a free trade area ended without an agreement.

The EU does not accept the comprehensive negotiation, covering various sectors and points, desired by the Southern Cone countries. The EU insists upon discussing each item, step by step.

Moreover, the Europeans refuse to make a new offer until the Mercosur first puts its offer on the table. Despite these differences, both sides are unanimous in affirming that the October deadline for signing a free trade agreement can still be met.

For the EU's Director of International Agricultural Affairs, João Pacheco, pessimism is not called for. "We shall converse with our Ministers and see what they decide," he declared.

Pacheco said that he is returning home somewhat disappointed, but believes that the negotiations have not been suspended. "We're just taking three weeks off for vacation, after which the talks will be resumed."

A feeling of frustration also exists on the Mercosur side. The expectation of a week of intense debate ended up not coming true. The meeting terminated ahead of schedule, halfway through the third day.

The Mercosur negotiators will now concentrate their efforts on more direct contacts with the European Ministers. The next meetings are set to take place September 13-20.

For Ambassador Régis Arslanian, coordinator of negotiations for the Mercosur, the objective is for both sides to present their offers simultaneously. In his evaluation, the Europeans are obtaining more advantages, for the time being. "The negotiations are unbalanced and need to be corrected," Arslanian stated.

On August 13, in Assunción, Paraguay, President Luiz Inácio Lula da Silva participated in a ceremony to inaugurate the headquarters of the Permanent Appeals Court of the Mercosur.

The court will be a venue of last resort to judge trade disputes between Brazil, Argentina, Paraguay, and Uruguay, members of the trade bloc. All the decisions will have the force of law.

Geneva Meeting

"The G-20 played a fundamental role in reaching the agreement. And that was a revolution at the World Trade Organization. We have introduced a certain degree of multi-polarity there, with Brazil playing a key role," said the minister.

Amorim added that Brazil will continue to fight for its legitimate rights and real interests. "We are not involved in international negotiations for crumbs," he said. "And that holds for FTAA, the WTO and the European Union."

Amorim said that the Geneva meeting had made the G-20 a legitimate negotiating force and created a new WTO geometry.

"Now we have a triangle: the United States, the European Union and the G-20," he declared.

And we have recently been able to win a few victories, said the minister, pointing to the ruling on developed nation farm subsidies, which Amorim called a great victory for developing nations.

"That ruling means the elimination of some US$ 10 billion in subsidies and export credits," said he Minister.

With regard to market access, Amorim admitted that not much progress had been made. But he insisted that the situation today is better than it was in the past.

He cited the use of the so-called principle of progressivity, which divided tariffs into bands and then made bigger reductions of higher tariffs.

"The decision to use the progressivity principle has been an obvious improvement over the Cancun and Uruguay rounds," he declared.

In closing, Amorim said that there was no deadline for the complete elimination of subsidies and export credits.

Betting on Russia

Brazil expects to triple its modest share of the Russian market within three to four years. At the moment, 2 percent of Russian imports come from Brazil.

The first step to reach that goal is a trade show that will take place in Moscow between September 24 and 28, featuring Brazilian footwear, clothing, perfumes and jewelry, besides cachaça, coffee and fruit juices.

Brazilian entertainers will also perform at the event. As part of the exhibition, the organizers are offering to bring Russian journalists to Brazil to see the country and its products.

In the first half of this year, Brazilian exports to Russia rose 3 percent to US$ 690.2 million. The number of Brazilian firms exporting to Russia rose by 25 percent during that period.

Brazilian products with a good chance of acceptance in Russia, besides those mentioned above, are: beef, pork and poultry, cheeses, bananas and oranges, soybean oil, cocoa and chocolate, tobacco, pharmaceuticals, tires, sanitary napkins, textiles, washing machines, telephone and telegraph equipment, and automobiles.

The Russian economy has been expanding strongly. It was up 7.3 percent in 2003, and estimates are that it will grow 6 percent this year. With a population of 144 million and a GDP of US$ 434.2 billion, the Russians imported US$ 74.5 billion worth of goods in 2003 (exporting US$ 135.2 billion).

Russia is Brazil's 14th biggest trade partner.

Ana Paula Ferrari works for Agência Brasil (AB), the official press agency of the Brazilian government. Comments are welcome at lia@radiobras.gov.br.
Translated from the Portuguese by David Silberstein.

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