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

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82 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.
primarily producing for the Brazilian domestic market. 230 Transnational corporations in MERCOSUR, which are oriented towards domestic markets, are not pursuing any standardized interests with respect to the settlement of a free trade agreement between the EU and MERCOSUR. On the one hand, the opening of markets through tariff reductions within the framework of an FTA would mean for these companies additional competition from corporations, which are currently not residing in MERCOSUR. 231 On the other hand, exports to countries outside of MERCOSUR could increase through FTA and national regulations like, e.g., the minimum quota on the number of local employees, could be lifted through an international treaty. This situation might shed the first clear light on the, to some extent, differentiated positions of interest of the different players with respect to the ongoing free trade negotiations between MERCOSUR and the European Union: First of all, for foreign companies already present in MERCOSUR it is an advantage to have a better position on the markets than the non-resident companies would have, and second of all, it is an even bigger economic advantage if, by means of an association treaty between the EU and MERCOSUR, the regulations on capital transfers and minimum quotas for local suppliers or local employees should be offset. MERCOSUR, with its four governments, does not follow any kind of uniform position in international negotiations on FTAs within the framework of ALCA/FTAA/ ZLEA and MERCOSUR-EU negotiations. The interests and positions are still too different in some areas. For example, the four MERCOSUR member states agree on the issues related to obtaining access to agricultural markets in the industrialized countries, as well as to the reduction or abolishment of the European agricultural subsidies. But with respect to other issues this unanimity does not exist in this form: While the Brazilian government largely agrees with the Argentinian government on the issues of market access, investment and public procurement, 232 the Uruguayan government is pursueing different positions. The Uruguayan foreign minister, Didier Opperti, does not want to “lose any possibilities in the area of trade. We are not willing to accept a formulation [in the ALCA negotiations], which, from our perspective, would impose self-restraints with respect to market access. Trade and investment are central 230 Estado de São Paulo, December 3, 2003, p. B7. 231 Nunnenkamp, Peter: Foreign Direct Investment in MERCOSUR: The Strategies of European Investors, in: Paolo Giordano - Chaire MERCOSUR de Sciences Po [edit.]: An Integrated Approach to the European Union - MERCOSUR Association, 2002. 232 Quote of the Argentine foreign minister Rafael Bielsa taken from the: Estado de São Paulo, November 18, 2003, p. B3: “Estamos ombro a ombro com os brasileiros, afirma Bielsa”, Own translation: “We are side by side with the Brazilians, said Bielsa.” 83
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Christian Russau Enforcement of int
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Preface Since the end of 1999 the C
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(EU) and the Common Market of the South (MERCOSUR)? - FDCL

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