The basic texts for the free trade agreement between Mercosur and the Gulf Cooperation Council (GCC), according to Brazilian diplomats, are going to be ratified during the summit of the South American bloc, to take place on January 18th and 19th in Rio de Janeiro.
Also to be signed during the summit are the lists of products that will be included in the agreement, and the schedule for reduction of tariffs on the goods.
"The GCC has shown keen interest, and we were impressed by it," said the head of the Division of the European Union and Extra Regional Negotiations (Duex) of the Itamaraty (Brazilian Foreign Office), Ernesto Fraga Araújo.
Araújo accompanied ambassador Régis Arslanian, the director of the International Negotiations Department, during the last round of negotiations between the two blocs, which took place last December in Riyadh, the capital city of Saudi Arabia.
Araújo said that the agreement should be signed as a whole at the next GCC summit meeting, to be held in June. The Arab bloc is comprised of Saudi Arabia, Bahrain, Qatar, the United Arab Emirates, Kuwait, and Oman.
According to the diplomat, the participation of a GCC delegation at the summit in Rio has been confirmed. The delegation will be led by the GCC secretary general, Abdul Rahman Al-Atiyyah, who will sign the texts that have already been agreed upon. The negotiations began in the first half of 2005.
In December 2006, the two blocs exchanged their first lists of goods to be included in the agreement, which will be negotiated until the Mercosur meeting.
Araújo stated that the agreement will cover nearly 100% of the trade basket between the two regions, and should include a tariff elimination schedule to be carried out in three phases: the first one starting immediately after the agreement becomes effective, the second one in four years, and the last one in eight years, depending on the goods in question.
There are still a few adjustments to be made by the participating countries, and rough edges to be smoothed out in sectors such as petrochemicals, textiles, iron and steel, and agriculture. But, according to Araújo, these issues should pose no problems.
In addition to the product lists and the tariff reduction schedule, also to be signed in Rio are the basic texts establishing guidelines for goods, services and investments. Araújo said that, basically, the texts will adopt the norms of the World Trade Organization (WTO) on free trade.
Other issues, such as safeguards, dispute settling and the sectors to be included in the fields of services and investments are going to be negotiated after the Mercosur summit.
"The agreement will be very beneficial, such a range of coverage is hard to achieve," Araújo claimed. As an example, he cited the tariff preference agreement established between Mercosur and India in 2005.
Despite the fact that it includes a limited amount of products, and has not yet yielded any practical effect, since it has not been ratified by the legislative powers in Brazil and Argentina, the Mercosur-India trade has doubled since the signing of the agreement, also due to the publicity surrounding the negotiations.
"The Brazilian private sector is now paying more attention to India, and vice versa," he declared.
The diplomat believes that, with inexistent or significantly lower tariffs, Mercosur will become a more competitive supplier of products to the Gulf market, including merchandise traditionally provided by the European Union, the United States and Australia.
"All countries are willing to negotiate with the Arab Gulf, we saw people from Japan, New Zealand, the European Union and Singapore there," he said. "And we may be the first ones to have an agreement with them," he finished off.
All of these nations and economic blocs are eyeing the potential of a region that has been growing above the world average due to rising oil prices and investment flows.
According to a report by international consultancy company Roland Berger, the total estimated amount spent by the GCC countries in various projects totals US$ 600 billion.
The consultancy company also estimates that in 2005 and 2006 the Arab countries had US$ 600 billion in extra revenues due to the rise in oil prices.
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