EU economic relation with MERCOSUR Essay

IntroductionMERCOSUR (Southern Common Market) was established in 1991 as a customs union and common market between Argentina, Brazil, Paraguay and Uruguay. Chile and Bolivia later united as associate Mercosur members. Since mid-2000, they have been engaged in negotiations with the EU to establish a free switch area covering some(prenominal) regions.History in the MakingOn whitethorn 28, 2004, EU and MERCOSUR trade representatives convened in Guadalajara, Mexico to continue an ongoing negotiation process. MERCOSUR holds a comparative advantage in a wide of the mark range of agricultural produce, which composes more than half of its total exports, while Europe is particularly strong in industrial and capital markets, such(prenominal) as automobiles, telecommunications and banking.Their complementary color economies verifym ideally suited for engaging in free trade, with each component of the bloc specializing in their specific fields of strength. However, import quotas and tariff s, intended to cherish MERCOSUR members infant industries as well as high cost European farmers, present mountainous obstacles to the realization of any free trade agreement. At the May 28 summit, both sides tentatively agreed to open their markets to unusual competition. The EU and MERCOSUR have each shown a leave aloneingness to make difficult concessions in order to see their negotiations catch out to fruition.The Border is ClosedThe European Unions protectionist agriculture regulations insulate locally grown produce from foreign competition. Cultivatable land, a precious and scarce commodity on the continent, is extraordinarily expensive. Hence the European Parliament instituted subsidies, import quotas and tariffs to keep the regions relatively inefficient agro-industry afloat by regulating prices on the European market.These policies have effectively kept MERCOSUR products out of the European market as the EU refused to negotiate on gap its markets up to foreign competiti on by the raising of its quotas and the lowering of its tariffs. However, European negotiations have recently made important concessions aimed at expediting the process. The EU Common Agricultural polity of 2003, which significantly reduced Europes farm subsidies, coupled with an increase in import quotas and a lowering of tariffs, have strengthened MERCOSURs self-assurance in the positive outcome of trade talks.Europes reluctant acquiescence to MERCOSURs demands is an attempt to pursue a strategy aimed at obtaining great access to South American markets where European industries and sectors (such as automobile, telecommunication, banking and computer production) have excelled in the past and appear to have an even more prosperous future. akin its European counterpart, MERCOSUR has traditionally been averse to granting great access to these markets, defending its protectionist policies with an infant industry argument. These industries are too small, it maintains, to compete in the world market, and therefore opening its borders at this time could destroy domestic firms. However, the South American Common Market has recognized the significance of Europes offer, and in return, has allowed for ever greater access to its telecommunication and banking industries.Partners in DecayThere is a downside to the growing ties between Europe and MERCOSUR. Europes courting of MERCOSUR is at best undermining the textile that binds the fragile G20 together. G20 members fear that the EU-MERCOSUR agreement could provide unfair access to markets, which would be illegal according to the World slew Organization (WTO) standards.According to these, Most raise Nation Status (MFN) cannot be reserved for specific countries, but must be shared among all applicable WTO members. According to some G20 members, including China, India, South Africa and Brazil, the European Unions decision to engage in trade talks with MERCOSUR is a stratagem to undermine the G20, an organization that could potentially cause serious problems for both the EU and the United States.Restructuring the MapAn accord between the two giant trading blocs has the potential to upset and shift the balance of power in the international trade arena, not only affecting the G20 but also challenging US economic hegemony in the Western Hemisphere. A leading light in the Cairns group of agricultural exporters and a founding member of the G20, Brazils political clout in the international community is growing exponentially. Its ability to want greater respect in political and economic agreements has persuaded the EU to offer greater concessions to MERCOSUR and is forcing the United States to reformulate its position on the Free Trade knowledge domain of the Americas (FTAA).There is no doubt that Brazil is using the EU-MERCOSUR trade agreement, and the commercial bonanza it should bring, as a weapon to increase its bargaining power in forthcoming FTAA talks with Washington concerning farm subsidies. The election of two left-leaning presidents in Brazil and Argentina, as well as a shift away from a Western Hemisphere trade pact toward a more amicable courtship with Europe, reflects a fundamental change in Brazilian and Argentine government as well as in their strategy in dealing with the US. Neither government wants to be considered, as Brazilian President Lula stated during his presidential campaign, an annexation of the United States.In 2004, worries over progress in negotiations deepened as the co-chairmanship of the FTAA rotated to the United States and Brazil. Unfortunately, the inability to compromise by the proposed trading blocs two major powers has stalled progress on the realization of such an agreement. It also has persuaded a newly confirmed pessimist MERCOSUR to look across the Atlantic for an opportunity to hike up its global thrust and self-interests. The United Statess reluctance to discuss any reductions in farm subsidies during recent FTAA trade rounds has h indered the chances of signing a Free Trade Area of the Americas agreement by 2005, the projected year for it to be announced.Meanwhile, Europe has slipped into the foreground, prepared to equal or even replace the United States as the rife trading power on the South American continent. The United Statess hegemonic status in the Americas is in peril. To maintain a semblance of the status-quo, Washington get out have to concede to demands for a slash in farm subsidies if it wishes to reignite the negotiation process, or at least keep it alive, and to maintain itself as the overriding regional superpower, the US will be forced to compromise.The EU-MERCOSUR free trade agreement without a question is a threat to the United Statess sanction in the region. Europes belated decision to open its agricultural markets to foreign competition leaves Washington in a precarious position at the negotiating table with its Latin American counterparts. Previously, the EU and the US held the same l ine regarding agricultural subsidies both argued that the subject should be headed at future WTO trade rounds rather than through bilateral trade agreements. If it now wishes to remain competitive with Europe in the South American market, Washington will have to address the issue of the subsidies and import quotas that up to now have plagued many of the Latin American countries. With the EU now retreating from its long held protectionist position, the US can no daylong expect to walk away from negotiations with a victory in hand which places Latin America in a dependent position in the FTAA. incision Bottom US-Latin American RelationsThere is no question that US-Latin America relations are at their lowest point in a generation. Clearly, when it has come to leadership and a strong moral stance regarding US policy initiatives towards Cuba, Venezuela and Haiti, Secretary of State Powell has provided no leadership and certainly no vision. By default, such leadership fell into the hand s of Otto Reich and a small band of venomous rightwing ideologies headed by Otto Reich, Roger Noriega and Dan Fisk, who held their places because Powell allowed them to be imposed on him.As a career propagandistic and huckster-ideologue, Otto Reich built his professional existence on disseminating public disinformation along with a capacity for extremist politics that have done incalculable damage to the charge of a balanced and obligated regional policy. Almost single-handedly, he has bent and distorted US-Latin American relations and has produced a level of odium that cannot be good recalled in the recent chapters of the bilateral relationship between the two hemispheres.His legacy hardly serves that word, filled as it has been with vulgar rhetoric, meretricious analysis, Rasputin-like conspiracies, and an inability to distinguish responsible behavior from that of a low quality goon. He, together with his fellow alumni from former Senator Helmss tawdry regional policy-making wo rkshop at the Senates foreign relations committee, the State of Departments Roger Noriega and Dan Fisk, have gone a long way to pollute US hemispheric ties so fundamentally that it will take a generation to undo.From a Caribbean, Andean or South American standpoint, the EU-MERCOSUR pact strengthens their respective chances for a fairer and freer FTAA agreement. The United States can no longitudinal treat its hemispheric partners as subsidiaries of a holding company which it controls now that Europe has presented itself as a viable second option for a grooming trade relationship.Living in an era of increasingly free global trade, the EU-MERCOSUR pact could be a refreshing change from a history of mostly self-serving and US-dominated agreements. The trade agreement between the European Union and MERCOSUR could come to rival the Free Trade Area of the Americas as a major hemispheric economic force, even if both are achieved. As the United Statess soft power continues to decline in t he region, Europes global song looks increasingly more appealing. If the US wishes to maintain its traditional position astride the Western Hemisphere, it must learn from its European counterparts how to stop talking down and start talking to Latin America.Internet ReferencesREDES / Friends of the Earth Uruguay http//www.redes.org.uy/LObservatori de las Transnacionales (LOT), research group focusing on Spanish TNCs in Latin-America. Contact David Llistar david.llistardebtwatch.orgRed Mexicana de Accion Frente al Libre Comercio (RMALC) http//www.rmalc.org.mx/ international Institute (TNI) http//www.tni.org/altreg/index.htmCorporate Europe Observatory (CEO) http//www.corporateeurope.org/Alianza Chilena Por Un Comercio Justo y Responsable (ACJR) http//www.comerciojusto.cl/index.htmAsociacion Latinoamercana de Organizaciones de Promocion (ALOP) http//www.alop.or.cr/