Karel De Gucht: The State Of Play of The EU-Mercosur Trade Negotiations – Transcript


Karel De Gucht, European Commissioner for Trade

Chairman, Ladies and gentlemen,

It is a great pleasure for me to take part in this event today.

We are all facing economic challenges at home: the EU is working to support the Euro and you in Brazil are concerned about your manufacturing base being eroded by currency movements.

In such circumstances, we must use trade as a motor for growth. Trade – fuelled in particular by the dynamism in South America – can provide new export and investment opportunities.

And as we all know one of the main avenues for improving the EU-Brazil trade environment is the EU-Mercosur Association Agreement.

The EU is fully committed to conclude a balanced and ambitious trade agreement with Mercosur. The finalisation of the negotiation is a priority.

An agreement would bring considerable benefits for our two regions. It would create one of the largest free trade areas in the world with over 700 million people.

For EU exporters, investors and service providers, this would mean improved access to a large, dynamic and still relatively protected market. Mercosur is already our 8th most important export market, above India (€ 41 bn of exports in 2010). Given the dynamism of its economy (its GDP grew by 7.5% in 2010) this trend is likely to continue. According to a recent study carried out for the Commission, the potential benefits of an ambitious agreement with Mercosur would amount to an increase in European GDP by €14.7 to €21.4 bn (2007 prices) and would result in a doubling of bilateral exports.

In addition, this negotiation will not only lower tariffs for trade in goods but will also result in improved market access in services/investment and public procurement, and better rules in areas such as intellectual property rights or technical barriers to trade.

The potential value of an agreement is therefore huge and as Business Europe and CNI, the Brazilian Business Federation, recently reminded in a joint letter, such an agreement would “create thousands of jobs over the next few years in both regions”.

For Mercosur, a balanced and ambitious free trade agreement will mean better market access to the EU. And the EU is already the first trade partner of Mercosur, so the potential is huge.

Despite what you might think with the current talk of bailouts and austerity budgets, Europe remains a great place to do business.

We might be 27 different countries but we are a single market with one set of rules for all. We have 500 million consumers, the world’s largest single market and a very affluent market that looks for quality goods. Our legal investment framework is not only one of the most secure, but also one of the most open in the world.

Europeans are already happy drinking Brazilian fruit juice or catching planes made by Embraer. But we are also interested in a broad basket of goods and services from Brazil and Mercosur as a whole. Just as Volkswagen and Fiat cars are a common sight on the streets of Sao Paulo, we can open up opportunities for European and South American goods to become household names in each others markets.

You only have to look at some of the world’s best loved beers (Stella Artois, Leffe, Hoegaarden, Beck’s, Bass) to realise what can emerge from the combination of a Belgian company (Interbrew) and a Brazilian company (AmBev).

You, as leading businesses from Brazil and from Europe, understand better than most the importance of open markets and possibilities of globalisation. You know better than anyone what the negotiations on a new trade agreement could bring.

Brazilian companies have a special role to play, coming from as the main economic power in the region. You know the major benefits at stake in this agreement in terms of increasing exports and by adding value. In many respects, the EU is your perfect partner: our economies are complementary. We do not represent the same competitive threat for light manufacturing than some of the Asian giants. The EU can offer opportunities for moving up the value chain based on innovation and technological advances.

As you are in favour of the EU-Mercosur trade deal, I would urge you to make those views heard. I know that Business Europe and CNI are strong supporters of the trade agreement and believe it will create thousands of jobs. But we are at a delicate stage of negotiations – with some voices critical of the competition it might bring. So it is important that those of you who stand to gain from such a trade deal are vocal in your support. Associations such as for example EUBrazil or the EU-Mercosur Business Forum have a key role to play in this respect as they are best placed to mobilise the support of the business community on both sides of the Atlantic.

Let me also stress another important point. In the current global economic context it is crucial that we all avoid resorting to protectionist measures while we are negotiating this agreement. The world economy is going through a major crisis which we will not solve if we start working in isolation to protect our domestic markets from outside competition. Protectionism is not the solution. I am concerned by some protectionist measures taken over recent months, for examples the measures on import licences in Argentina or the recently announced Brazilian measures on taxation for the car industry which discriminates against imports.

In the context of the EU-MERCOSUR negotiations both sides will need to make concessions in order to reach an agreement. If one side takes restrictive measures during the negotiations, this is against the free trade agreement spirit. It will therefore be even more difficult for us to ask our constituencies to accept those concessions.

Ladies and gentlemen,

Regional integration, the development of an internal market and a commitment to the global trading system have brought success to Europe for more than half a century and we hope that Mercosur will also follow this road.

The EU-Mercosur trade negotiations are set to harness a lot of the complementarities between our two blocs. The benefits are potentially enormous. But we need the active and vocal support of the business community to bring this agreement to life.

Thank you for your attention.

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