‘Four Plus One’ could add up to zero for Mercosur, US

by Mario Osava

Rio de Janeiro, 31 Aug 2001 (IPS) - The US and South America’s Mercosur trade bloc will start talks on a possible trade agreement in Uruguay on Tuesday, parallel to the negotiations on the Free Trade Area of the Americas (FTAA).

The Mercosur (Argentina, Brazil, Paraguay and Uruguay) and the US are seeking a short-cut, to circumvent obstacles run into by the FTAA negotiators, who represent 34 countries with diverse economies of vastly different sizes.

The “four plus one” initiative arose against the backdrop of Argentina’s financial crisis, and “it would be positive if the US would effectively open its market” to agri-business products, an area in which Argentina is competitive, Mario Marconini, executive director of the Brazilian Centre on Foreign Relations (CEBRI), told IPS.

But Washington is taking the opposite route. It actually increased farm subsidies to $30 billion this year, and has lined up nearly $200 billion in subsidies over the next 10 years, pointed out Marconini, a former Brazilian secretary of Foreign Trade.

The first obstacle standing in the way of the proposed “four plus one” agreement between the Mercosur and the US is the reluctance of US Congress to grant the Bush administration “fast-track” authority to negotiate free trade deals without the risk of having them amended later by the legislature, he pointed out.

Furthermore, said Marconini, “it is difficult to imagine” the US making concessions to allow Latin America broad access to its market, given that it has not shown a clear interest in eliminating farm subsidies or overturning anti-dumping legislation that is standing in the way of a number of Brazilian exports.

Exorbitant tariffs, in some cases over 100%, restrict the entry of 129 products into the US, according to a study by CEBRI. That list includes “all of Brazil’s competitive goods,” observed Marconini.

Washington could lift such barriers and increase the quotas it sets on imports of a number of products, to open its market to merchandise from the Mercosur countries. But in exchange, it would seek to throw open the market for services, government procurements, and other areas that are sensitive for Brazil, he added.

Nevertheless, “we must not desist from negotiating a four plus one” accord, since Brazil, Latin America’s giant, and the Mercosur - a bloc of 215 million potential consumers that accounts for nearly 80% of South America’s combined GDP - have economic clout and can obtain benefits through such an agreement, he argued.

The first meeting will take place Tuesday in the resort city of Punta del Este, 140 km east of Montevideo, the Uruguayan capital, where the Cairns Group - comprised of 17 agricultural exporting countries seeking the elimination of farm subsidies worldwide - will be gathering.

The ministers of agriculture and foreign affairs of Argentina, Brazil, Paraguay and Uruguay will be present at the Punta del Este Cairns Group conference, where US Trade Representative Robert Zoellick will be representing the US, which was invited to the meeting even though it does not form part of the Cairns Group.

The second Mercosur-US meeting has been scheduled for 21 September in Washington.

The negotiations of the “four plus one” accord could be partly modelled on the experience of Chile, which is working hard to sign a free trade agreement with the US this year. Chilean negotiators aim to include a bilateral dispute settlement mechanism in the future Chile-US accord.

The dialogue between Mercosur and the US is positive, because the Mercosur is strengthened every time it negotiates as a bloc, and further wards off the threat that it will dissolve within the FTAA, said Rubens Ricupero, Secretary-General of the United Nations Conference on Trade and Development (UNCTAD).

The imbalance of forces is inevitable given the enormous power of the US, but it is attenuated if the interlocutor is a group of nations, said Ricupero, a former Brazilian finance minister and a trade ambassador of Brazil at Geneva. Ricupero added that Mercosur associates, Bolivia and Chile, gave added strength in the talks.

The Mercosur’s success in the negotiations with the US “will depend on the agenda and the issues to be negotiated,” he stated. But the ideal, he said, is for the dialogue to take place “simultaneously to and in a harmonious manner with the multilateral talks in the World Trade Organisation (WTO).”

It is probable that the US will refuse to negotiate its farm subsidies and stringent anti-dumping rules with Latin American countries, but “it will do so somewhere,” asserted Ricupero. Holding parallel negotiations in different fields will highlight the chances in each set of talks of making progress on each specific issue, and “an informal link” between the two dialogue processes will thus be forged, said Ricupero.

Moreover, Brazil - and in consequence, the Mercosur - is in a very different position than Mexico when it signed the North American Free Trade Agreement (NAFTA) with Canada and the US. Even before NAFTA went into effect in 1995, 80% of Mexico’s exports were going to the US.

Brazil’s exports, on the other hand, are distributed in similar proportions between the European Union, the US, Asia and Latin America, which means it must play “on every board,” especially in the WTO, which is improving access to the markets of 142 countries, said Ricupero.

Marconini said “it came as a surprise” that the US would announce its plan to negotiate with the Mercosur just when the IMF, with Washington’s blessing, was deciding to grant Argentina $8 billion in credit. “That association between finances and trade is never clearly expressed,” although it should be, he observed.

However, the idea of dialogue between the Mercosur and the US “is not new,” underlined Ricupero. Indeed, in 1991, when the South American bloc was first being created, the US and the Mercosur agreed to set up a forum for trade talks, although the initiative ended up falling by the wayside. – SUNS4960

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