EU-Mercosur trade talks

Strategic patience runs out

At last, Brazil is keen on a trade deal

Dec 14th 2013 | BRASLIA | From the print edition

WHILE Roberto Azevdo, the new Brazilian boss of the World Trade Organisation, armtwisted his wa to a m!ltilateral deal in Bali "see arti#le "htt$%&&www'e#onomist'#om&news&finan#e(and(e#onomi#s&)*+,*-)+(global( trade(tal.s( ield(deal(first(time(almost()/( ears(!na##!stomed0 0, ba#. home another trade negotiation is rea#hing a #r!#ial stage' The E!ro$ean 1nion and 2er#os!r3#om$rising Argentina, Brazil, 4arag!a , 1r!g!a and 5enez!ela3have set an end(of(6an!ar deadline to swa$ o$ening bids in a long(mooted bilateral deal' "5enez!ela, onl re#entl admitted and in terrible e#onomi# sha$e, will not ta.e $art'0 7!##ess wo!ld hel$ stagnant E!ro$e to e8$ort its wa ba#. to growth and o$en

new mar.ets for 2er#os!r9s effi#ient farmers' :ail!re wo!ld leave E!ro$eans over$a ing for food and 7o!th Ameri#a9s biggest e#onom , Brazil, lang!ishing on the sidelines of globalisation' And 2er#os!r, whi#h in re#ent ears has negle#ted trade liberalisation in favo!r of leftist $oliti#al rhetori#, wo!ld dwindle even f!rther into irrelevan#e' Trade tal.s between the E1 and 2er#os!r started in )///' The stalled over similar iss!es to those whi#h dogged the WTO negotiations% E!ro$ean !nwillingness to e8$ose #osseted farmers to #om$etition and 7o!th Ameri#an desire to shelter ind!str from high(;!alit im$orts' B!t #hanging #al#!lations have bro!ght both sides ba#. to the table' E!ro$e now sees a new mar.et for its man!fa#t!rers in the emerging middle #lasses of Brazil' A!sterit ma.es E1 farm s!bsidies ever more !naffordable% tho!gh re#ent reforms have trimmed them, the still gobble <+/ billion "=>/ billion0 a ear' And #hea$er food loo.s tem$ting to $oliti#ians fearing the ele#toral #onse;!en#es of falling living standards' 2er#os!r9s renewed interest in a deal is in $art down to the e8$ir of e8isting trade $referen#es' In 6an!ar all 2er#os!r #o!ntries e8#e$t 4arag!a lose the $referential a##ess the E1 grants to develo$ing #o!ntries, sin#e the are now deemed too ri#h to need it' B!t within Brazil, at least, the shift in attit!des goes dee$er, sa s ?arlos Abi@aodi of the Aational ?onfederation of Ind!str ' 1ntil re#entl its b!sinessmen tho!ght that their vast, sheltered domesti# mar.et meant the #o!ld $rofit in s$lendid isolation' B!t im$orts from ?hina have shown that even swingeing tariffs #annot .ee$ o!t #om$etition, if it is #hea$ eno!gh' BThe 9ve learnt that the #an9t $rote#t themselves from globalisation'C Even :IE74, the 7Do 4a!lo ind!strialists9 lobb , whi#h has long $romoted ind!strialisation via high tariffs and big s!bsidies, is now #hanging its t!ne' A re#ent $oli# $a$er #alled for trade agreements with not onl the E1 b!t also the 1nited 7tates' Brazilian ind!str #o!ld #om$ete on e;!al terms if the government ta#.led the long(standing custo Brasil "BBrazil #ostC0 b #!tting red ta$e and ta8es and im$roving infrastr!#t!re, sa s R!bens Barbosa, a former di$lomat involved in 2er#os!r9s #reation who now advises :IE74' 2r Barbosa blames 2er#os!r9s fail!re to stri.e trade deals on the left(wing statists now in $ower in Argentina and Brazil, who are !n$ers!aded b liberalisation and see trade in $oliti#al rather than e#onomi# terms' In the $ast *E ears more than E+/ trade deals were registered at the WTO' B!t 2er#os!r signed @!st fo!r, with 4er!, Eg $t, Israel and the 4alestinian A!thorit ' Big regional negotiations, s!#h as one between the E1 and 1nited 7tates, raise the $ros$e#t of a world divided into trade blo#.s, with 2er#os!r left o!t' That seems not to worr Argentina' 1nder 4resident ?ristina :ernFndez, it has

be#ome more $rote#tionist, even against 2er#os!r' Brazilian e8$orters of food, footwear and te8tiles have be#ome !sed to their $rod!#ts being held !$ at the border, and to dela s in $a ment be#a!se of e8#hange #ontrols' Brazil9s e8$orts to Argentina sl!m$ed b )*G in )/*) before re#overing a bit this ear' B!t its government9s do#trine of Bstrategi# $atien#eC with its errati# neighbo!r means it rarel .i#.s !$ m!#h of a f!ss' Brazil9s new(fo!nd determination to stri.e a deal with the E1 ma $rovo.e a showdown' Along with 4arag!a and 1r!g!a , it has $re$ared its Boffer listC, stating the goods and servi#es it is willing to in#l!de in a dealH it is also $re$ared to liberalise inward investment and government $ro#!rement' A goal agreed in )/*/ of in#l!ding ,/G of im$orts was treated as Bgos$elC b Brazil, sa s an offi#ial with .nowledge of the deal' B!t Argentina has $re$ared a less ambitio!s offer for trade in goods, and is dragging its feet on servi#es, investment and government $ro#!rement' Brazil is $!shing it to hit the deadline' If it doesn9t, Brazil wo!ld be willing to dis#!ss a two(s$eed sol!tion, sa s the offi#ial, leaving Argentina on the sidelines' Even strategi# $atien#e has its limits'

From the print edition: The Americas