MEBF MADRID
Thursday May 16

Panel: Mercosur/EU Interregional Association Agreement
Ingo Plöger
Conselho de Administração
Melhoramentos

Your Excellencies,
Ministers,
Ambassadors,
Entrepreneurs,
Ladies and Gentleman,

Its is a great moment to see business leaders, joined by top officials of the governments of Mercosur and EU member states, the Presidency of the EU, the European Commission and the European Parliament reaffirming with determination the dialog, with the purpose to present objective contributions to build up an interregional space for free trade.
It is a great moment in the history of the both continents, because we could overcome great negative aspects, to present strong recommendations, to establish priorities, to enhance trade and business relations between the two regions.

The European and Mercosur business community acknowledges that, despite the serious threats such the tragic events of Sept 11, that the launching of the WTO Doha round is a good sign that governments are eager to put the means to further increase international trade and investment flows. It will allow proceeding in the liberalization of world trade in all areas, taking particularly into account the interest of the developing countries.

The business community of MEBF requests that governments and international organizations make their best efforts to eliminate the restrictions to trade and investment flows, as well as to remove other factors that artificially distort the competitiveness in world trade. It also requests the creation of conditions of stability, predictability and transparency that are necessary for safe decisions of investments and to define business strategies. It also requires that all countries intensify their efforts to create an international environment favorable to the social legitimacy of democratical values, to economic opening, to social equity and to sustainable growth.

It urges that businesspersons and governments of both regions deepen their commitments to improve the conditions and quality of life, making this targets a central axis of the interregional association under negotiation.
We welcome the efforts that are being made to create an interregional association on a free trade area without the exclusion of any sector. However we are concerned about the little progress achieved up to now. It understands that the process must be accelerated and that substantial progress can be attained in a reasonable period. To this end the MEBF understands that the Summit in Madrid should establish a schedule with a time frame for the current negotiations.

The trade flows between Mercosur and the EU grew at an annual average of 10,4% during the period 1991-2000. This rate is made up of an annual increase of 3,8% of exports from Mercosur to the EU, against an annual growth of 27,5% of the exports to Mercosur during the same period. EU= companies have made significant FDI in Mercosur, annual flows have been above 20 billion Euro many years, summing up a total stock of 112 billion E in the year 2000.

In the recent past Mercosur has accumulated significant trade deficits with the EU; some years they reached 6 billion E. We believe that all possible efforts should be made in order to reduce the imbalance of trade between the two regions through a significant increase of Mercosur exports to the EU countries, especially of agriculture and agribusiness products, in which the Mercosur has comparative advantages, since its is more efficient and competitive.

The liberalization of trade would increase the bilateral commercial flows. The European Commission has shown that, if 90% of the interregional customs would be abolished, the trade from the EU would increase in 6,5 bill US and from the Mercosur 5,1 billion US. In Brazil they calculated an increase of 10 billion US from the Mercosur by total liberalization.

The persistent imbalance in bilateral trade relations, introduce an unstable structure for the sustentabilitity of the agreement, and request a special attention of all the participants, from the political and economical risks that is involved in a asymmetrical solution. So, it is crucial for the progress in the biregional negotiation agenda that the elimination of non-tariff barriers and subsidies can be addressed within the field of the FTA agreement. If subsidies can only be negotiated in the multilateral framework, the biregional negotiation would have to be tied to the multilateral ones in order to guarantee a balanced agreement.

The MEBF reasserts its support to the objectives defined for biregional negotiations in Madrid 95 and in Rio de Janeiro 99, in particular the following principles:

• Comprehensive negotiations covering all sectors and products,
• Single undertaking,
• Introduction of the concept of asymmetry, as it has been introduced on the EU South Africa Agreement, which would take into the large current imbalance in bilateral trade relations and could facilitate the recovery of countries in deep recession,
• The subsidies for agriculture should be included,
• All types of tariffs, non-tariffs and subsidies should be transformed into ad valorem tariffs and submitted to liberalisation programs.

MEBF recognizes that the EU has made a firm commitment to the strengthening of bilateral relations with the Mercosur. However, the EU is also dealing with other important issues as enlargement to the East, the institutional reform in the EU, and the Doha round. MEBF is afraid that the negotiation of the agreement might loose momentum and political priority. MEBF encourages EU members state governments and the EU Commission to maintain said commitment high in the political priorities and take action accordingly.

MEBF recommends that in spite of the recent economic problems faced by Mercosur countries, their governments should preserve the main guidelines of their modernization process and economic opening. However there are other issues in the political agenda of Mercosur, such as economic crises and co-ordination of economic policies, the Doha Round and the development of certain aspects of the Treaty of Asuncion that need considerable attention from Mercosur leaders. Thus, MEBF urges Mercosur authorities to make their utmost efforts to rapidly conclude the negotiations of the Association Agreements.

European companies have made large investments in Mercosur, providing capital, technology and management capacities, making a substantial contribution to the development of industrial and civilian infrastructures. Mercosur and South America have still a high potential of infrastructure-projects in an amount of 180billion US for the next 7 years. The participation of European investments in that area and investments oriented to exporting to other regions of the world should be encouraged. Likewise, the presence of Mercosur companies in the EU should be estimulated.

Despite the difficulties of both side in the last 12 month the Mercosur and European business leaders presented to the authorities in December 2001 more than 60 recommendations in the areas of Customs and Customs Procedures; Standards, Technical Regulations and Conformity Assessment procedures and e-Commerce. Unless rapid progress is made in certain issues of the bilateral negotiations, MEBF urges the negotiators to regularly agree on specific measures to facilitate business development during the negotiation process recommended in the Buenos Aires Paper.
The second Summit in Madrid will open a new space of expectations, hopes and demands. For both parts it has come the decisive moment to speed up the interregional integration in political, economic and social terms.

Between 2002 and 2005 will come the decisive moment:
Or the EU and Mercosur decide the moment, or the moment will decide for them. The first option will be the winner way - in the second one we will share the losses.

We all have the same target to be on the winner way!
Lets work on that!