Mercosur senior members Argentina and Brazil as anticipated proposed this Friday, November 28, an increase of the common external tariff, (Arancel Externo Común, AEC) for certain products, and as was expected junior members Uruguay and Paraguay rejected the idea.
According to sources from the Uruguayan delegation in Brazilian capital Brasília the proposal is extensive to dairy produce, leather goods, textiles and the wood industry. Uruguay argued that in the current context of global trade contraction it was not advisable to follow such a path. The arguments were supported by Paraguay.
"In most cases it's not of Uruguay's interest, on the contrary it could even be negative for the country," said a Uruguayan diplomatic source.
Uruguay feels Argentina is becoming increasingly protectionist and returning to the imports substitution policies of the 1950s, which is contrary to Uruguay's position of greater market options, free trade and elimination of protectionism.
"Uruguay needs larger markets such as Mercosur, and overseas, but Argentina's policies are contrary to that stand," added the source that also signalled the different positions regarding Mercosur and the Doha round global trade talks.
The increase in the common external tariff needs the consensus of four members and will be decided when the Foreign Affairs and Economy ministers of the four full members meet again in Brazil December 15 in anticipation of the presidential summit in Salvador, Bahia state.
However this is not the first time partners clash over tariffs. The increase could finally reach a consensus with a caveat; Uruguay and Paraguay are not forced to apply them. In November, a year ago, tariffs on textiles and footwear were increased to 26% and 35% respectively, but Uruguay and Paraguay were allowed to keep the previous tariffs. A final review is scheduled for 2010.
Although it was not considered on those terms this time "we shouldn't be surprised if that is an elegant way out for the controversy," said the Uruguayan source.
Another area of contention was the Doha round on global trade in the framework of the World Trade Organization but here the teams were different: Argentina was left on its own.
Argentina stated it was against a greater opening of markets for industrial goods, a position contrary to Uruguay and Brazil, and one of the causes for the WTO stall in Geneva last July when the US and India clashed over agriculture subsidies.
Argentina's strong protectionist stand in the WTO meeting in Geneva even surprised Brazil which considers Buenos Aires a "strategic ally."