EU & South America "very close" to free trade deal
The European Union and the South American customs pact Mercosur are now, after two decades of talks, "very close" to agreeing on a free trade accord according to the Brazilian foreign minister. The deal is already being hailed as a significant counterpoint at a time when tensions in global trade have been on the rise.
In an interview with the Financial Times, Ernesto Araújo said: “We are very close to closing the deal with the European Union.”
He added that there was “political drive we haven’t seen in a long time” and said the deal could be signed by July.
"We are fixing the dates for a meeting in June. Of course, one always has to be prudent because you never know,” Mr Araújo said, adding that there were still complex issues. “But there is a very clear, a very positive disposition from the European Union and from our side.”
If the deal is concluded, it would be the largest ever negotiated by the EU in tariff reduction terms.
The EU side has, however, struck a more cautious note and said that there was much work to do be done. European Commission President Jean-Claude Juncker said in an interview with Politico that the Mercosur talks were "difficult" and added: “I am not optimistic, but I am not pessimistic.”
There are still several sensitive issues to be ironed out before the deal between the two blocs can be inked. These include greater competition for European beef farmers and for Mercosur car manufacturers, as well as handling of sanitary controls, export sugar quotas and denominations of origin for produce.
There has also been reports of frustration on the part of the EU with a perceived lack of coordination between the nations of Mercosur. The full members of the South American bloc are Brazil, Argentina, Uruguay and Paraguay. Venezuela is also a full member but has been suspended in December 2016 when doubts were raised about the country's compliance with the bloc's membership requirements.
Both sides are keen to achieve a deal soon before the arrival of a new European Commission in October and the potential election of a left-wing government in Argentina later this year.
The deal, if approved, would cover everything from services, to public procurement, to goods. An EU deal with Mercosur, the world's fourth-largest trade bloc, would follow close behind the inking of a similar deal with Japan and with Canada. In terms of the total value of abolished tariffs, the Mercosur deal would be worth four times the Japan and Canada deals combined.
The Mercosur deal also presents a rare moment to show agreement in global trade at a difficult time when Donald Trump's White House continues its trade war with China and tensions are rising with Mexico.
The deal also presents Brazil and Argentina with an opportunity to open up their notoriously insular economies. Not only would it be Mercosur's first trade pact outside the region since the bloc's formation in 1991, but it would would provide a boost to the governments of Brazilian President Jair Bolsonaro and Argentinian President Mauricio Macri, both of whom are presiding over sluggish economies characterised by paralysis of economic policy.
The EU's chief trade negotiator Cecilia Malmstrom said that while there were still "some complicated matters" to iron over, "there is now a window to close this" before the new European Commission takes over.
Refusing to be drawn on a deadline Ms Malmstrom said: “I will absolutely do my utmost. This is priority number one right now.”
“Showing to the world right now that the EU and that part of Latin America . . . are ready to do a trade agreement will be an extremely powerful signal,” she added.
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