Brazil Pushes for Urgent and Aggressive Free Trade Talks With Arabs

Led by Brazil the Mercosur wants to return to free trade treaty talks with the Gulf Cooperation Council (GCC) in September, after the holiday period in the Arab world and before Ramadan, the holy month that this year should begin around September 22.

The idea is to organize a meeting between representatives of both blocs in Riyadh, the Saudi capital.

Brazil has just been sworn into the rotating presidency of the South American bloc and intends to place negotiations with other regional blocks at the top of the diplomatic list again. The return to these processes gained greater strength with the failure of the Doha Round negotiations in the scope of the World Trade Organization (WTO).

Although little changed in terms of talks between the Mercosur and the GCC in the first half of this year, negotiators at the Itamaraty, the Brazilian Foreign Office, forecast few difficulties in the talks.

This is due to the fact that, in the evaluation of the Brazilian diplomatic corps, the economies of both regions are complementary and there are few sensitive sectors, i.e., in which both blocks are competitors.

The Mercosur has already sent the GCC the proposals for legal documents for rules of origin, which determine the percentage of local inputs a product must have to be free of tariffs; safeguards, which are trade defense mechanisms; and controversy solution.

With the legal part reasonably well developed, the negotiators believe that it may be possible, in September, to discuss the liberalization of trade itself. The Itamaraty prefers not to discuss each product, which may take a long time, but to work on a global negotiation and later, if that is the case, place sensitive sectors as exceptions to the agreement.

The evaluation of the Brazilian diplomacy is that liberalization of bi-regional trade may be close to 100%. Although the matter is still going to be discussed by members of the South American bloc in August, the Brazilian negotiators believe that the proposal will be "ambitious".

To justify this confidence, the Itamaraty is considering a study executed at the beginning of the year by the Brazilian Ministry of Development, Industry and Foreign Trade. At the time, the ministry asked private sector organizations to show what products they would like to be placed in the list of negotiations.

The answer, according to the negotiators, was a broad range of sectors, including consumer goods in general, machinery and equipment, vehicles, agricultural equipment, shoes and textiles, among others. The liberalization may bring good gain to the Brazilian companies that gained competitiveness in the markets of the Gulf.

Initially it was expected that the negotiations would have some kind of development in the first half, which did not happen, according to the Itamaraty, due to agenda problems. Brazilian negotiators, however, still believe in the possibility of the conclusion of the agreement this year.

Investment

In parallel to the treaty, the Mercosur, at the request of the GCC, intends to promote a seminar about investment in the countries of the South American bloc.

According to the Itamaraty, the Brazilian Foreign Ministry, with high oil prices, the countries of the Gulf, mostly large producers of the commodity, are seeking new destinations for investment, not only the United States and Europe.

In the evaluation of negotiators, the agreement itself may attract greater Arab attention to the investment opportunities in South America. Even so, the inclusion of clauses in the treaty preserving access without barriers to reciprocal investment is considered.

The Itamaraty also hopes for the return of negotiations between Egypt and Morocco. In the case of the representatives of Morocco, the Brazilian negotiators want to schedule a meeting as soon as possible.

The Mercosur is made up of Argentina, Brazil, Paraguay, Uruguay and at the beginning of the month Venezuela entered the group. The GCC includes Saudi Arabia, Bahrein, Qatar, the United Arab Emirates, Kuwait and Oman.

The South American bloc has over 250 million inhabitants, a Gross Domestic Product of over US$ 1 trillion and a trade volume of over US$ 300 billion, according to the Itamaraty.

The Arab bloc, in turn, has a total GDP of US$ 576.8 billion, a population of 36.5 million people and global trade of US$ 510.4 billion, including exports and imports.

Mercopress – www.mercopress.com

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