EU lifts tariffs on Brazilian soluble coffee

by Mario Osava

Rio de Janeiro, 11 Jul 2001 (IPS) - Pascal Lamy, the European Union’s trade commissioner, announced Wednesday in Brasilia that a portion of Brazilian instant coffee will be exonerated from tariffs, an indication of Europe’s interest in closer ties with the South American nation.

The EU will permit the entry of up to 31,364 tons of coffee tariff-free over three years, with a limit of 8,740 tons in the first year, and larger quotas in the two subsequent years. The decision marks the end of a 10-year trade dispute and erases Brazil’s threat of filing a complaint with the World Trade Organisation (WTO).

It was “an amicable solution,” which is the best route, Lamy said upon making the announcement.

Brazil had accused the EU of “discriminatory treatment” because the bloc had lifted tariffs on its imports of soluble coffee from the Andean countries and from Central America as a way to stimulate the fight there against the illegal narcotics trade, but had maintained the tax on the Brazilian product, reduced from 11% to 9% in 1999.

This tariff restriction caused Brazil’s soluble coffee exports to plummet more than 40% since 1991, when Europe’s discriminatory practice began, Mauro Malta, executive director of the Brazilian Soluble Coffee Association, told IPS.

Meanwhile, Colombia and Ecuador’s international coffee sales grew more than 50% in that same period.

Brazil’s soluble coffee sector was rescued by increased exports to Russia, Eastern Europe and Japan.

Wednesday marked the end of Lamy’s three-day visit to Brazil to meet with trade officials here about the terms of a new round of international trade talks under the auspices of the WTO. He also confirmed the EU’s great interest in achieving a trade accord with Mercosur (Southern Common Market).

Europe’s willingness to immediately establish ties with Mercosur, which includes Brazil, Argentina, Paraguay and Uruguay, was made evident during the presentation of a trade liberalisation proposal by both blocs last week in Montevideo.

Despite the good intentions demonstrated by the EU, Lamy made a series of criticisms against the proposal during his stay in Brazil. The initiative establishes the progressive reduction of tariffs - over a maximum period of 10 years - for all industrial goods and several agricultural products.

Brazil’s minister of Agriculture, Marcus Pratini de Moraes, commented that the EU proposal is disappointing because the opening of the European agricultural market remains limited.

The EU says, “sensitive” farm imports will continue to be restricted through quotas and other non-tariff barriers. These products include sugar, cereals, dairy products, tobacco, meat and some fruits - all of which are Brazilian exports.

The various obstacles for agricultural trade, widely implemented by industrialised countries, prevent Brazil from expanding its annual international sales by as much as $6.0 billion, calculates Pratini de Moraes.

The Brazilian government and business leaders from the farming and agro-industry sectors are grumbling about the European policy of stimulating commodity imports, with zero tariff, while taxing processed products, which have higher added value.

In the case of coffee, for example, only shipments of the full bean are exempt from tariffs, meaning that value-adding processes take place within the EU.

As such, some of the bloc’s member countries are major exporters of roasted or soluble coffee, despite the fact that none of them grow the bean, creating numerous jobs in the coffee processing industry there.

Brazilian soy and leather also suffer the effects of the EU’s protectionist policy. The European bloc is the largest market for these raw materials, and purchases them without tariffs, but protects its own industry by taxing soy-based oils and leather shoes.

Brazilian sugar, meanwhile, simply has no access to the EU market due to the tariff protections and the subsidies for the local sugar beet production, pointed out Eduardo Pereira de Carvalho, president of the Sugarcane Agro-Industry Union of Sao Paulo.

Many developing countries are demanding the reduction or elimination of farm subsidies in industrialised nations, but the EU trade commissioner asserted that it is not an issue he will discuss with Mercosur because it should only be handled as part of multilateral negotiations within the WTO.

However, he admitted the possibility of eliminating subsidies that affect international trade, as long as some are maintained in order to ensure the livelihood of five million farmers in the EU as a means to prevent serious social problems within the bloc. – SUNS4935

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