(EU) and the Common Market of the South (MERCOSUR)? - FDCL

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4. 1 The free trade agreement between EU and MERCOSUR: Interests of
companies, lobby groups and governments – The case of Brazil
European corporations, which have been operating in MERCOSUR for years
and which mainly concentrate on the domestic markets within MERCOSUR, in one
respect have a smaller interest in rules for tariff reduction within the framework of a
future FTA, as compared to, e.g., companies which produce in Europe and hope for
sales advantages in foreign trade. European automobile producers in MERCOSUR,
such as Volkswagen do Brazil, traditionally produce primarily for the domestic market.
Nonetheless, Volkswagen do Brazil is at the moment apparently trying to diversify
its strategy of focussing on domestic markets through exports of automobiles
produced in Brazil to the United States, Asia, Europe and Africa. 227 This new policy
would also benefit from a tariff reduction in these markets through a FTA: the European
import tariffs for automobiles produced abroad are at 10 percent, in accordance
with the WTO, for cars produced in Brazil according to the GSP tariffs (Generalized
System of Preferences 228 ) they are currently at 6.5 percent. 229 In MERCOSUR, however,
import tariffs on automobiles produced outside of MERCOSUR are currently at
35 percent. Such a constellation comes in handy for corporations already located in
MERCOSUR, but for corporations that are not yet present in the Common Market of
the South, this at the same time means a “disadvantage of non-location.”
Mercedes Benz do Brazil in 1997 still produced forty thousand trucks and buses.
In 2002 this number had fallen to 5,451 units. In 2003 production numbers again
rose to 38,000, of which 9,300 were exported, which was in particular due to the
increasing demand in Argentina. For 2004 a production of around 40,000 trucks and
buses is expected, where 30,000 will be produced for the Brazilian domestic market
– which means that Brazil will advance to be the second largest market for Mercedes
trucks and buses, led by the U.S. with 90,000 units and followed by Germany with
27,300. On the other hand, the production of automobiles in the principle Mercedes
plant in Brazil, Juiz de Fora, has been losing money for years, which according to
management is due to the devalution of the Brazilian Real: again Mercedes here is
227 http://www.estado.estadao.com.br/editorias/2003/06/28/eco022.html.
228 “GSP: The Generalised system of preferences is a system by means of which preferential tariffs are granted
unilaterally to certain countries on a non-reciprocal basis. It was approved by GATT in 1971, allowing industrialised
members to adopt one-way tariff preferences in favour of developing countries. The waiver was made more general
and permanent in 1979 with adoption of so-called “Enabling Clause” allowing industrialised countries to implement
measures extending “differential and more favourable treatment” to developing countries. The EU launched this
preferential system in 1971, in order to help developing countries sell more of their products in the industrialized
countries and build up their own industry. The preferences under the GSP are granted to exports of specific
products from particular countries.” http://europa.eu.int/comm/trade/gentools/glossarycont_en.htm#gsp.
229 O Estado de São Paulo, December 2, 2003.