Brussels must aim for substance on trade

Brussels must aim for substance on trade

A purely symbolic EU deal with Mercosur would be a disappointment

There is a distinct spring in the step of many EU officials these days. Along with the health of the European economy, Brussels seems to be making the running on setting the rules of international trade after years being mocked as the protectionist laggard of global governance. 

Donald Trump has withdrawn from the 12-nation Trans-Pacific Partnership, undermining the US’s role as a hegemon in the world’s busiest trading region. China’s plans for infrastructure and trade agreements are limited by its own manufacturing-oriented economic model. The EU seems to have been left in the lead.

Following last year’s deal with Canada, the EU recently reached an outline agreement with Japan, its sixth-biggest trading partner. Its member states are keen to show they can brush off the minor inconvenience of Brexit and keep moving forward, while countries such as Japan, despairing of getting any sense out of Washington any time soon, are increasingly willing to deal with Brussels.

It is disappointing, then, that the EU also seems willing to do deals with little substance just to score symbolic points. A case in point is Mercosur, the Latin American customs union whose full members are Brazil, Argentina, Paraguay and Uruguay, with whom the EU has been in intermittent and fruitless talks since 1999.

Mercosur, although maintaining a common external tariff, is riven with internal disputes and blocks on trade between its members. Although world-beating agricultural exporters, Brazil and Argentina are often defensive and protectionist on some manufacturing and services.

From Mercosur’s point of view, a window of opportunity has opened up. Venezuela, which did little to enhance the bloc’s credibility after it joined in 2012, has been suspended because of the country’s economic and political crisis. Argentina, whose Peronist tradition has traditionally made it suspicious of trade liberalisation, is under the unusually free-market presidency of Mauricio Macri. If the Mercosur governments can agree a collective offer, the EU seems likely to snap it up and sign a quick and easy agreement, perhaps as early as this year.

Such a deal would certainly be a political coup. But it seems all too likely to be a cosmetic arrangement with little real liberalisation. Phil Hogan, the EU agriculture commissioner, said last week that Mercosur could not expect much more access to the European market for beef or sugarcane ethanol, two of the bloc’s super-competitive exports. In turn, the Mercosur countries are unlikely to do much to open up their protected manufactured goods or services markets, or tighten up patent rules on pharmaceuticals.

This is a squandered opportunity. If the EU wants to gain credibility as a global standards-setter, it needs to make sure that each of its trade deals makes a significant difference. In particular Brussels will limit its impact considerably if it rules out ever signing meaningful deals with competitive agricultural exporters.

The detailed and complex standard US model for trade agreements has many faults, but inconsistency and a lack of ambition are not among them. If Brussels wants to supplant Washington as the world’s trade hegemon, it needs to look at quality as well as quantity. A substantive plan to let Latin American farm exports into the EU in return for manufactured goods and services going the other way would be a truly impressive achievement. A shallow deal signed by two risk-averse trade blocs desperate only to chalk up a symbolic success would not.

www.prensa.cancilleria.gob.ar es un sitio web oficial del Gobierno Argentino