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04/12/2016

EU, Brazilian companies push for a bilateral trade deal

Trade & Society

EU, Brazilian companies push for a bilateral trade deal

EU-Brazil trade.

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With fresh new executives in Brussels and Brasilia, there is a window opportunity for relaunching negotiations between the European Union and Brazil to reach a bilateral trade and investment agreement, business leaders said in a survey.

In a poll conducted by the EUBrasil Association, international companies indicated that a free trade agreement should be the priority for the new Juncker European Commission.

CEOs of 27 leading companies involved in trade between the two partners said that the elimination of tariffs is still important, but no longer a priority, as regulations are the main barriers to the development of business and trade between the two blocs.

“The negotiations between EU and US to conclude the TTIP are about to accelerate. This process aims at the creation of a new system of rules for investments and trade of goods and services that will surely be imposed to the rest of the world,” said Professor Alfredo Valladão, from the Paris Institut d’Etudes Politiques and president of EUBrasil Advisory Board.

“It is time for Brazil and its manufacturing sector to get involved in this debate, in order to avoid being marginalised by the extremely fast emergence of a new global economic paradigm and its regulations. This would be a damaging situation for the interests of both Brazil and EU,” he said.

Among the main burdens highlighted by companies, top of the list is the complicated process for approval of environmental licenses. Business leaders also mention some well-known problems, including the lack of transparency on auction procedures, lack of regulatory predictability, local content requirements, including for government procurement, and the barriers to trade in services in several sectors, such as telecommunications, insurance and maritime transportation.

“The European Commission should work in partnership with Brazil’s government to build a permanent dialogue to improve regulations in order to strengthen the financial and economic bi-lateral ties,” said Luigi Gambardella, president of EUBrasil.

Mercosur’s slow moving

The business push comes at a time when Brazil is about to take the leadership of the South Amercian trading bloc, Mercosur, in 2015.

Speaking at the presentation of the survey, Brazilian ambassador to the EU, Vera Machado, said: “Brazil will assume the rotating presidency of Mercosur and will be in a position to advance the agenda, hopefully moving it from our memories to become a reality.”

Fifteen years after talks between the EU and Mercosur were first launched in 1999, both sides have missed self-imposed deadlines to swap offers for opening markets in a pact that would encompass 750 million people and $130 billion in annual trade.

After a five year break, talks were resumed in 2004, with the goal of exchanging proposals by the end of 2013, which was missed too.

Once the EU and Mercosur exchange their proposals for a free trade agreement, negotiations will ‘move fast’ and the deal should be closed sometime in 2015, according to EU ambassador in Montevideo, Juan Fernandez Trigo, Spanish daily El Pais reported.

Argentina’s unwillingness to come to the negotiating table and the country’s  protectionist move to defend domestic industry and rein in imports has become a great obstacle for the negotiations.

“We’re in the midst of that traffic, which is receiving each other’s proposal and from that moment onwards I believe negotiations will move fast,” said Trigo.

“We expect that the Mercosur proposal on tariffs reduction will be on terms agreed back in 2010 and means that 90% of the universe of goods to the exchanged will be free of tariffs.”

At the end of July, four of Mercosur five full members, Argentina, Brazil, Paraguay and Uruguay, agreed on an only joint proposal to be presented to EU countries.

In an op-ed in EurActiv, EUBrasil’s Gambardella said that regardless of Mercosur, EU-Brazil negotiations should move forward.

“There are two possible parallel paths to unlock the current situation. The first is to go ahead with a set of bilateral EU-Brazil agreements on “anything but trade”: rules, standards, SPS, investment, taxation, regulations, business facilitation, the whole arsenal of technical barriers to trade and non-tariff barriers to trade,” he wrote.

This can be done without endangering Mercosur , which would be kept as a negotiating umbrella, and would strengthen the Brazilian hand in promoting the second path: the sequencing of the bi-regional talks, he added.

Background

The EU recorded for the first time in 2012, a surplus in its trade with Brazil nearing to € 2.3 billion (in 2011, it had a deficit of € 3.3 billion). This surplus rose to € 7.1 billion in 2013 due to a decrease in Brazilian exports to the EU.

Timeline

  • June 2015: EU-CELAC (Community of Latin American and Caribbean States) summit in Brussels
  • 2015: EU-Brazil Summit in Brasilia