The strategic association between Mercosur and the European
Union (EU) seems to be an elusive idea. After missing the
October 2004 target, the negotiations of a bi-regional agreement are,
in practical terms, almost paralyzed.
At the official level, however, both parts consider that the negotiations
could be concluded in a relatively short term. Recently, both the
President of the European Commission and President of Uruguay –
acting Pro-Tempore President of Mercosur – have expressed their will
to conclude the negotiations. Most probably, this will continues to be
the official position of both sides, at least on the immediate future.
Still, many observers and analysts maintain some doubts about the
possibility of concluding an agreement within the next months. At
least, if it intends to be an agreement that includes an ambitious free
Those doubts reflect the prevailing mood on the fate of the Doha
Round. It is known that both, the bi-regional and the multilateral trade
negotiations are de-facto related by a common element: the possibility
of articulating a reasonable trade-off between what Mercosur could
obtain in agriculture and the EU in access for industrial goods and
services. It involves also the scope of exceptions that each part needs to
include, as a result of their main sensitive sectors and products.
For that reason, it is difficult – but not impossible – to imagine that
an ambitious bi-regional agreement could be signed before the conclu-
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sion of the Doha Round. And the possibility of success, does not
depend only on an eventual agreement between the two regions. Other
protagonists are crucial and the United States above all.
Three related questions require some analysis. They are:
- Concerning the present situation: Why a negotiation process that
was launched with such enthusiasm, raising great expectations,
became almost paralyzed in the last three years?
- Concerning the future: Which are the most possible outcomes of
the bi-regional negotiations within a foreseeable future?
- Concerning the role of the business sector: Could the MEBF play an
active role in promoting the idea of a more intense cooperation
among the two regions?
Which is the actual situation of the bi-regional
The negotiations of a Mercosur-EU bi-regional strategic association
were launched at the first LAC-EU Summit, at Rio de Janeiro in 1999.
Previously, a framework co-operation agreement was signed at Madrid
in 1995. It is still in force. Eventually, it could be a useful framework
for a more intense bi-regional Mercosur-EU partnership that does not
include trade preferences.
Formal negotiations began in 2000. According to the original
concept that still prevails, they should be conclude by a bi-regional
strategic association with three related pillars: political dialogue,
economic cooperation, and free trade commitments consistent with
WTO rules. After almost eight years, what is missing to finalize the
negotiations is mainly the third pillar. No agreement was achieved in
October 2004. Since then the negotiation is, in practical terms, in a
stalemate. However, low transparency make it very difficult to evaluate
the real progress obtained in any of the areas of the negotiations,
including those apparently concluded – political dialogue and
economic cooperation. Draft texts and substantial information are not
included in the official Web page of any of the two parts. In some way,
the negotiations have had a flavor of old fashion secret diplomacy.
As mentioned before, difficulties for the conclusion of Doha Round
appear as the most common explanation for the actual situation of the
bi-regional negotiations. However, other factors have had also an influence
in the lack of results or in the difficulties to explore alternatives.
Those other factors could explain what appears to be an insufficiency of
incentives, on both parts, to afford some of the main costs of concluding
the negotiations (sensitivities in the agriculture sector in the case of the
EU, and in the industrial sector in the case of Mercosur countries).
Among them, three factors could be mentioned as being apparently
- Deep changes in the international landscape since the
original idea of a bi-regional strategic cooperation was
launched. Not only those changes have been dramatic at the global
level (recalling only some of them: the emergence of new relevant
protagonists on the economic competition field and, increasingly,
on international trade negotiations; the new strategic relevance of
energy and bio-energy; the environment agenda due, mainly, to the
increasing evidence of weather changes). But also important
developments could be observed at each of the two regions. Some
of them are the result of the impact of global changes in their
external priorities. Others are the result of the fact that nor the EU
not even Mercosur, are the same they were in the nineties. The EU
is larger, but also Mercosur has entered in a process of enlargement
with the inclusion of Venezuela, not yet completely formalized.
- The erosion of the initial enthusiasm for a strategic partnership. On the European side, that enthusiasm had something to do
with the earliest day idea that Mercosur was following the European
model of regional integration. Together they could strengthen
a multipolar multilateral global system. Gradually this image of
Mercosur and its potential has been replaced by an increasing
perplexity about its goals and its capacity to deliver what was
promised, particularly in terms of an effective customs union. The
recent incorporation of Venezuela, in some way has contributed to
the European perception of what is even considered to be the
failure of Mercosur. What is really Mercosur in terms of real
economic integration? This is one frequent question raised by
Europeans businessmen and economic integration specialists.
Mercosur seems to have in Europe a strong identity and credibility
problem. And on the Mercosur side, the original enthusiasm had a
lot to do with the fact the EU was expected to promote a new
model of relations involving a highly developed region and a group
of developing countries. This enthusiasm diminished in view of
what was considered to be a highly mercantilist approach on the
European negotiating proposals, that were not perceived as taking
in consideration the huge asymmetries of economic dimension and
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of degree of development among both sides. This approach didn’t
appear to be compensated with a more substantial effort of
economic and financial cooperation.
- The fact that the idea of a Free Trade Area of the America’s
(FTAA) has failed. In some way, the initial interest of the EU and
its firms in a strategic association with Mercosur, had something to
do with the possibility that a preferential treatment for American
firms, would eventually affect their relative competitive positions
within the markets of Brazil and Argentina. What is clear is that the
virtual paralysis of the bi-regional negotiations since 2004, coincide
with the collapse of the hemispheric negotiations.
Which are possible scenarios for the future development
of the bi-regional Mercosur-EU association?
At least three scenarios are foreseeable for the future of the biregional
association. They are:
- A successful or relatively successful scenario: It would imply a
conclusion of the bi-regional negotiations, before the next May
LAC-EU Lima Summit or during 2008 as a result of a substantial
political impulse eventually received at Lima. It would require,
previously, the untying of the main agriculture knots that have
paralyzed, until now, both the Doha and the bi-regional negotiations.
Or it could require the acceptance of the idea of a two step
negotiation at the bi-regional level, with step one including the
strategic association agreement and a first stock of WTO consistent
trade preferences, and then a “Doha-plus” second step, that could
result from the conclusion of the present WTO trade negotiations.
- A stalemate or “quasi-failure” scenario: It would imply a “sine
die” postponement of the actual bi-regional trade negotiations. The
formal argument would be, in this case, that the negotiations
should wait for the final conclusion of the Doha Round. Assuming
that the DDA could eventually be concluded in 2009 or 2010, this
would imply a similar delay for the bi-regional negotiations. Meanwhile
the EU will concentrate its action toward Mercosur, in some
economic cooperation programs, in their bilateral relations with
each member State and, particularly, in the development of the
strategic partnership with Brazil. An eventual bilateral preferential
negotiation between the EU and Brazil has been excluded until
now by both parts. But obviously, it is a hypothesis that should not
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be completely excluded in the future, depending on the evolution
of Mercosur within the next years, particularly on the development
of its customs union and on the degree of flexibility that could
finally prevail concerning trade negotiations of its member states
with third countries.
- A pragmatic scenario: It would imply a development of the
main elements that characterizes a strategic association, temporarily
excluding trade preferences and the signing of a new agreement. In
this case, pending the conclusion of the present negotiations,
strong action would be concentrated in the development of various
elements that were included in the 1995 Madrid Framework
Agreement. In most cases the full potential of the Agreement was
not developed due to the high concentration off efforts since 1999
– both at the official and at the business sector level – in the biregional
trade negotiation. Through the use of all the potential of
the Madrid Agreement, a large part of the non-preferential
elements of the Mercosur-EU relation could be covered. It would
be even possible to introduce further developments taking advantage
of its evolution clause. A political decision to takes advantage
of all the potential of the Madrid Agreement, could be complemented
by an invitation extended by Brazil to its Mercosur partners,
to participate in its bilateral strategic partnership with the EU.
In any of those scenarios – specially the first and the third one – and
due to the asymmetries in the economic dimensions and the levels of
development of both sides of the bi-regional relation, economic and
financial cooperation should be considered the central pillar of a strategic
association concept and program. It would have the effect of
strengthening the functional interaction among the three pillars of the
relation. The cooperation pillar would also facilitate the transition
toward a more integrated economic space between the two regions.
Within this idea of strengthening the cooperation pillar as a central
element of the association strategy, the instrument of trade and business
facilitation should be included as a central element.
What could be the role of the business sector in deepening
The business sector through the institutional framework of the
MEBF could play a leading role in the development of more intensive
relations between the two regions, even if the negotiations do not
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conclude in the 2007-2008 period. The role of the business sector as
driving force of other special relations of the EU – for example, the
Transatlantic Business Dialogue with the US or the ASEM Business
Forum – should be taken in consideration.
It’s contributions should be identified in a way that it could be
implemented in any of the above mentioned scenarios. They should
cover a very few high priority fields of action with a great potential of
synergies among them. Energy and trade facilitation should be some of
them. The main objective would be to introduce a new dynamic in the
bi-regional process and, at the same time, to draw some lessons from
other experiences, including those of the EU with Asia (ASEM). The
selected priorities should also contribute to generate synergies with
other business sector initiatives undertaken as a result of association
agreements of the EU with other LAC countries – including those
under negotiation with Central America and the Andean countries.
In any case, it seems convenient for the MEBF not to be limited to
the trade negotiations agenda. Instead, it should be perceived by key
businessmen of relevant countries of both regions and by the business
associations, as the forum where to meet and to really talk about
common concerns with high level officials of the Commission and
governments – including the Ministers of Economy as in the case of
ASEM. Obviously, issues related with the trade negotiations and the
implementation of eventual agreements should be included. But
particularly, it should be the forum to discuss substantive issues related
with the long term agenda of economic competition and cooperation
of the two regions, i.e. within the scope of the Madrid Framework
Agreement, including the issues originated in their relations with
China, India and other emergent economies.
How could be strengthen the capacity to work together in the
energy field? Is an instrument similar to the Energy Chart Treaty useful
to attract European investments to South America? Which is the real
potential for bi-regional cooperation in the field of food production
and of bio-energy? Should competitiveness and innovation be a main
focus of the common agenda of firms and governments of the two
regions? How firms of both regions could cooperate to take advantage
of what China and India means as a source of opportunities in the new
global economic competition landscape? Is it possible to have in the
new regional political situation a real friendly environment for investments?
How to strengthen cooperation in the field of trade facilitation
and infrastructure development (for example within the IIRSA framework)?
How to develop trilateral cooperation with least developed
countries, for example through the participation of the EU in
Those are only examples of the kind of issues that could be discussed
within the framework of MEBF. In this broader agenda, MEBF could
also take advantage of the technical analyses of relevant issues by several
academic bi-regional networks. The role of MEBF in that case would
be also to raise to the academic community some action-oriented questions
related with substantive long term issues, as those mentioned
MEBF could eventually play a significant role in deepening the biregional
relationship. But that role will largely depend on the dynamic
interaction – between the EU Commission, the governments, the business
sector and the academic institutions or social networks – that
could be stimulated by a long term vision of the bi-regional association.
Perhaps that long term vision is what is missing in this moment,
eventually explaining the relative anomy of the bi-regional strategic