After resuming the negotiations between Mercosur and the EU, three recent events deserve our attention. One of them is the meeting of the Bi-regional Negotiations Committee (BNC) in Buenos Aires. The second is the IV Brazil-EU Summit that was held in Brasilia, together with a bilateral Business Forum. The third is the debate in the European Parliament on the issue of agriculture and the bi-regional negotiations.

The three events illustrate the different lanes along which bi-regional negotiations are being developed. These have their own dynamics and help externalize the difficulties that will need to be confronted in order to conclude a bi-regional agreement.

It is still too early to predict which of the possible final scenarios will prevail in the future. These possible scenarios are: the successful conclusion of a bi-regional agreement; a lengthy negotiation with no concrete results; and a failure that eventually opens the door to bilateral agreements, such as those concluded between the EU and the Andean countries. This last scenario wouldn't be so much the result of a failure that originates in the European agricultural sector but one which could be attributed to a Mercosur member country.

The mere fact that the hypothesis of a bilateral agreement between a country and the EU is being considered doesn't strengthen the negotiating position of Mercosur before its European counterpart. In particular when the negotiations have just been re-launched and nothing would indicate that any country wants to prevent a successful outcome on this regard. Something similar happened at the beginning of the decade when the idea of bilateral trade negotiations between Mercosur countries and the US was proposed. The reaction at the time was quite negative, particularly on the side of Brazil.

Since such hypothesis is not the result of an open and honest debate between the partners it could be reflecting fundamental misgivings about the strategic alliance that upholds Mercosur. It would thus transcend the methodological aspect of how to approach trade negotiations with third countries or blocks of countries and would imply some sort of questioning at the core of Mercosur's existence.

After resuming the negotiations between Mercosur and the EU, three recent events deserve our attention. One of such events was the celebration of the first negotiating meeting of this new stage. The second relevant event was the latest Brazil-EU Summit held in Brasilia. The third event was the debate in the European parliament on the implications for European agriculture of an eventual bi-regional agreement.

The first negotiating meeting of the new stage, initiated in Madrid (see the May 2010 edition of this Newsletter), took place in Buenos Aires between June 29 and July 2. Formally it was the XVII Meeting of the Bi-regional Negotiations Committee -BNC- (for the final conclusions and annexes see http://www.puntofocal.gov.ar/, -or click here -in English- and http://www.attacargentina.com.ar/ o click aquí -in Spanish-). The formal talks were resumed through the meetings of eleven working groups. One of the main tasks of these groups was to pinpoint and update the issues that had been interrupted in October 2004. The tasks to be worked on towards the next BNC meeting, which will take place at the end of September in Brussels, were defined. The European negotiator, Joâo Aguiar Machado, "stressed that there is still substantial work ahead on a number of important issues to both sides in order for an ambitious and balanced agreement to be reached, while avoiding measures that restrict trade to secure an environment conducive to successful bi-regional negotiations."

These negotiations will entail a remarkable coordination effort both among Mercosur member countries and among EU member countries, including the Commission and its various internal areas. An efficient articulation within each one of the countries on both sides will be required as well. One example, among others, is the diversity of interests on the European side in relation to agriculture, the automotive industry and capital goods and services (regarding the different positions that can be found in Brazil see the article by Sergio Leo in Valor Econômico of July 12, 2010, entitled "Acordo comercial tem embaraço no Brasil").

The second remarkable event was the IV Brazil-EU Summit held in Brasilia on July 14 (see the text of the Joint Declaration on http://www.itamaraty.gov.br/) with the participation of the President of Brazil and the Presidents of the European Council and the European Commission. Paragraph 16 of the resulting declaration refers to the importance of the re-launch of the bi-regional negotiations: "Brazil and the EU recalled the importance of the negotiations for a MERCOSUR-EU Association Agreement which were re-launched at the IV MERCOSUR-EU Summit, held in Madrid, on May 17th 2010. They noted the outcome of the first round of discussions held in Buenos Aires between 29 June and 2 July. They stressed that the timely conclusion of an ambitious and balanced agreement that takes into account the specific interests of both sides would enhance the relations between the two regions and bring substantial political and economic benefits to them." (On the Summit see the article by Sergio Leo "Agenda fraca e sem temas polêmicos marca cúpula Brasil-Uniâo Europeia", in Valor Econômico, July 13, 2010). President Lula da Silva pledge to give priority to the bi-regional negotiations during the period of the Brazilian pro-tempore presidency of Mercosur in the second semester of 2010 (on this regard see the article by Yara Aquino "Lula quer prioridade para acordo entre Brasil e Uniâo Europeia", in Valor Econômico, July 15, 2010). From the text of the Joint Declaration it becomes clear, yet again, that there is a close link between the issues related to "bilateral affairs" included in item III and those that were to be developed between Mercosur and the EU as per the Framework Agreement of Cooperation signed in 1995, still in force. The IV Bilateral Business Forum took place at the same time of the Summit (on this issue see the article by Samantha Maia in Valor Econômico, July 15, 2010).

The third noteworthy event is the debate that took place in the European Parliament during its July 8 session, in particular regarding the chapter of agriculture of the bi-regional negotiation. The EC Commissioner for Trade, Karel De Gucht, participated in this debate. On this issue, it should be noted that the role of the European Parliament in the matter of international trade negotiations has consolidated with the enactment of the Treaty of Lisbon.

The questions posed by twenty-nine representatives of diverse nationalities and political groups revealed the main concerns of several member countries regarding the implications for European agriculture of the re-launched bi-regional negotiations. The full text reads as follows: "The College of Commissioners agreed at its meeting of May 4, 2010 to reopen negotiations for an Association Agreement between the EU and the Mercosur countries. Should an agreement result from these negotiations, it may present EU agricultural producers with considerable challenges, notably in the beef, poultry meat, wheat and fruit and vegetable sectors. There may also be indirect adverse consequences for other sectors including the pig meat sector. - What is the precise mandate which has been given to the negotiators with regard to the agricultural aspects of the negotiations? - Can the Commission provide Parliament with a detailed analysis of the likely impact on European producers if a deal is agreed on the basis of that mandate? - Which measures, if any, does the Commission intend to take to provide adequate compensation for EU producers whose economic interests are adversely affected by an Association Agreement with the Mercosur bloc? - How will it ensure that the standards, in terms of food safety, labor conditions, environmental protection and animal welfare, for the products imported from the Mercosur countries are equivalent to those demanded of EU producers? - What is the relationship between such an agreement and the ongoing negotiations for a multilateral agreement at WTO level?" (See http://www.europarl.europa.eu). In his intervention, Commissioner De Gucht answers these questions at length (for the full text of the parliamentary debate and the answers by Mr. De Gucht go to http://www.europarl.europa.eu/). It is advisable to read the full text.

The three previously mentioned events illustrate the different lanes along which bi-lateral negotiations are being developed. These have their own particular dynamics and help externalize the difficulties that will need to be confronted in order to successfully conclude an agreement of bi-regional association.

At the Buenos Aires meeting, for example, it was striking how the emphasis was placed in trade measures considered restrictive of bi-regional trade, especially by the Europeans - in one case this could eventually have an impact on trade flows of about two million dollars - with the possibility of interrupting the negotiations or of not holding a new BNC meeting in the future. The main European negotiator made some declarations on this regard. Some analysts have even perceived this as a preview of the "blame game" that could take place if negotiations were to fail because of one country and thus open the path for bilateral agreements, such as the case with the Andean Community of Nations.

At the same time, on occasion of the Brasilia Business Forum, a relevant industrial leader - Robson Andrada, President of the Confederation of National Industry (CNI) - allegedly criticized its government for not assigning priority to the bilateral agreements. According to what was leaked out to the press, he would have pointed out that "maybe the government believes that this should be done through Mercosur. I believe that it would be easier for our country to negotiate on its own, due to the existing differences between Brazil and Argentina, for example" (our own translation; see the abovementioned article by Samantha Maia, in Valor Econômico, July 15, 2010). This is an opinion that was also expressed by one of the candidates to the Brazilian Presidency, José Serra. Indeed, Mr. Serra remarked that "it would be of great importance to make Mercosur rules more flexible with regards to third parties so that we can move at different speeds. Brazil has more possibilities of advancing in the negotiations on its own than with the other Mercosur partners" (our own translation; version from ANSA, of July 16, 2010 on http://www.ansa.it). According to Serra this would require the modification of a Decision of the Mercosur Council (in reference to decision nº 32 from the year 2000). He also added that "in 2004, the agreements were working just fine, but Argentina resisted the idea of opening up its market to food products from the EU…" (See the Reuters-based article entitled "Tucano defende regras mais flexíveis para Mercosul", in Valor Econômico, July 16, 2010; see also the article by Juan Arias "Serra bets on an agreement with the EU that does not depend on Mercosur. The presidential candidate of the opposition believes that Brazil must move forward on its own", in El País, Madrid, 17 July, 2010). The Reuters article argues that the President of the European Commission, Mr. Durâo Barroso, mentioned Argentina as an eventual obstacle in the negotiations between Mercosur and the EU. Thus we can see a certain tendency to establish the idea that Argentina has been, and could become again, the obstacle for a bi-regional negotiation. However, it would seem that the references to the events of 2004 would require a more precise and well-founded analysis of the actual reasons for the failure. In relation to the recently resumed negotiations, nothing of what took place at the recent BNC would seem to justify the fact that Argentina should be mentioned as a possible source of insurmountable obstacles.

At the same time, the debate in the European Parliament demonstrated once more that the agricultural issue will pose severe difficulties during negotiations, at least on the side of some European countries.

It is still too early to predict which of the possible final scenarios will prevail in the future. These possible scenarios are: the successful conclusion of a bi-regional agreement; a lengthy negotiation with no concrete results; and a failure that eventually opens the door to bilateral agreements, such as those concluded between the EU and the Andean countries (Colombia and Peru). This last scenario wouldn't be so much the result of a failure originating within the European agricultural sector as of a failure that could be attributed to one of the Mercosur member countries.

This is the reason why the fact that some relevant personalities from Mercosur member countries should conjure up the hypothesis of an eventual bilateral agreement of one of the countries with the EU doesn't contribute to strengthen the negotiating position of Mercosur before its European counterpart. Particularly so, when the negotiations have just been re-launched and nothing would indicate that any country has the intention of preventing a successful outcome on this regard. Something similar happened at the beginning of the decade when the possibility of a bilateral trade negotiation between Mercosur member countries and the US was raised. The initiatives of some Mercosur partners for bilateral negotiations with the US caused at that time a negative reaction from Brazil.

Not being the result of a straightforward and open debate between the partners, the bilateral hypothesis based on the Andean-EU model and the necessary flexibilization of its current rules could expose fundamental misgivings about the strategic alliance that upholds Mercosur. In other words, this would go beyond the mere methodological plane of how to approach trade negotiations with third countries or blocks of countries. It would imply some sort of questioning at the core of Mercosur's existence.

Recommended Reading:

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• Barbosa, Rubens, "Mercosul e a Integraçâo regional", Fundaçâo Memorial - Imprensa Oficial, Sâo Paulo 2009.
  
• Brooks, Douglas H.; Stone, Susan F., "Accelerating Regional Integration: Issues at the Border", ADBInstitute Working Paper Series, Nº 200, Tokyo February 2010, en: http://www.adbi.org/ or click here.
  
• Cardoso, Eliana; Holland, Márcio, "South America For The Chinese? A Trade-Based Analysis", OECD Development Centre, Working Paper Nº 289, Paris, April 2010, en: http://www.oecd.org/ or click here.
  
• Cavallari, Alberto, "La fuite de Tolstoï", Christian Bourgois Éditeur, Paris 2010.
  
• Chandra, Alexander C.; Alfaro Manurung, Anna; Pambudi, Daniel; Pakpagan, Beginda, "Hopes and Fears: Indonesia's prospects in an ASEAN-EU Free Trade Agreement", TKN-IISD, Winnipeg, Manitoba 2010, en: http://www.tradeknowledgenetwork.net/.
  
• Correa, Carlos M. (coordinador), "Comercio Internacional: del GATT a la OMC. Disciplinas y Solución de Controversias", Serie Estudios, Facultad de Derecho - UBA - Eudeba, Buenos Aires 2010.
  
• CUTS-CITEE, "Reforming and Strengthening the WTO: Some Reflections and Suggestions", CUTS Centre for International Trade, Economics & Environment, Briefing Paper, 3/2010, Jaipur, en: http://www.cuts-citee-org.
  
• Debroy, Bibek; Chakraborty, Debashis (editors), "The Trade Game: negotiations trends at WTO and concerns of developing countries", Academic Foundation in association with Liberty Institute and Rajiv Gandhi Institute for Contemporary Studies, New Delhi, 2006.
  
• Fairlie Reinoso, Alan; Queija de la Sotta, "Relaciones Comerciales CAN - UE: Una perspectiva andina", Lima 2008.
  
• Fédorovski, Vladimir, "Le Roman de Tolstoi", Éditions du Rocher, Paris 2010.
  
• Granados, Jaime; Lizano, Eduardo; Ocampo, Fernando (editores), "Un puente para el crecimiento. Oportunidades y desafíos del Acuerdo de Asociación entre Centroamérica y la Unión Europea", BID-Academia de Centroamérica-KAS, 2009.
  
• Harper, Stefan, "Beijing Consensus. How China's Authoritarian Model Will Dominate the Twenty-First Century", Basic Books, New York 2010.
  
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• Kharas, Homi, "The Emerging Middle Class in Developing Countries", OECD Development Centre, Working Paper Nº 285, Paris, January 2010, en: http://www.oecd.org/ or click here.
  
• Osterlof, Doris (editora), "Desde la Crisis: Una Mirada de Futuro a las Relaciones América Latina - Europa", LATN - Fundación Carolina, Buenos Aires 2009.
  
• Montemayor, Raul, "Simulations on the Special Safeguard Mechanism. A Look at the December 2008 Draft Agriculture Modalities", ICTSD Programme on Agriculture Trade and Sustainable Development, Issue Paper Nº 25, Geneva 2010 en: http://ictsd.org/ or click here.
  
• OECD-FAO, "OECD-FAO Agricultural Outlook 2010-2019", Paris-Rome 2010, en: http://www.agri-outlook.org/dataoecd/13/13/45438527.pdf or click here.
  
• OECD-WTO-UNCTAD, "Report on G20 Trade and Investment Measures (November 2009 to Mid-May 2010), 14 June 2010, en: http://www.oecd.org/ or click here.
  
• Parini, Jay, "The Last Station. A Novel of Tolstoy's Final Year", Anchor Books, New York 2009.
  
• Saliou Camara, Mohamed, "The Development of a Trans-national Region in West Africa. Trascending the Politics of Sovereign Nation States", The Edwin Mellen Press, Lewiston-Queenston-Lampeter, 2010.
  
• Soto, Óscar, "El ultimo día de Salvador Allende", RBA Libros, Barcelona 2008.
  
• Villareal, M.Angeles, "The Proposed US-Colombia Free Trade Agreement: Economic and Political Implications", Congressional Research Service, CRS Report for Congress, Washington, April 16, 2010, en: http://fpc.state.gov/ or click here.
  
• Whalley, John, "Shifting Economic Power", First Draft for an OECD Development Centre Project on Shifting Global Wealth, Paris, September 2009, en: http://www.oecd.org/ or click here.
  
• Winters, L.Alan and others, "Innocent Bystanders. Implications of an EU-India Free Trade Agreement for Excluded Countries", Center for the Analysis of Regional Integration at Sussex - Commonwealth Secretariat, London 2009.
  
• World Trade Organization, "Annual Report 2010", WTO, Geneva 2010, en: http://www.wto.org/ or click here.
  
• World Trade Organization, "Report to the TPRB from the Director-General on Trade-Related Developments", WTO Trade Policy Review Body, WT/TPR/OV/W/3, Geneva 14 June 2010, en: http://www.wto.org/ or click here.