More grand strategies

The EU is said to be ready to offer a dis­crim­i­na­to­ry ‘region­al’ trade deal to the coun­tries of Mer­co­sur (the Latin Amer­i­can region­al group) that includes expand­ed access to Euro­pean mar­kets for farm goods in return for reduced pres­sure on Europe’s agri­cul­tur­al poli­cies in the WTO nego­ti­a­tions. bq. The move is designed to weak­en pres­sure on the EU to low­er its farm trade bar­ri­ers by, in effect, buy­ing off Argenti­na, Brazil, Paraguay and Uruguay with the offer of pref­er­en­tial trade con­ces­sions. These coun­tries have been among the fiercest adver­saries of Brus­sels in the glob­al trade talks. (“Finan­cial Times”: It’s dif­fi­cult to believe that an agree­ment along these lines would pass muster under GATT Arti­cle XXIV, which requires the full lib­er­al­iza­tion of “sub­stan­tial­ly all trade”. But Arti­cle XXIV is now most­ly hon­oured in the breech The FT’s assump­tion that such a dis­crim­i­na­to­ry deal would ‘anger oth­er agri­cul­tur­al exporters’ looks safe enough on the sur­face. The EU has recent­ly faced a num­ber of com­plaints from devel­op­ing coun­tries (e.g. Thai­land) on the impacts that its pref­er­ences have on their com­mer­cial access to the EU mar­ket. These devel­op­ing coun­try com­plaints are more dif­fi­cult for the EU to dis­miss than com­plaints from e.g. Aus­tr­lia, NZ, the USA or Cana­da. If it offered such a bar­gain to the Mer­co­sur coun­tries in the hope that this would reduce over­all press­sure on its agri­cul­tur­al poli­cies in the WTO the EU might be ter­ri­bly dis­ap­point­ed. It might just as eas­i­ly raise the pitch of crit­i­cism from coun­tries in Asia and Africa. But it’s not so clear how the oth­er ‘south­ern hemi­sphere’ agri­cul­tur­al exporters would view such a deal. Its unwise to make assump­tions about the impact of dis­crim­i­na­to­ry access arrange­ments for food prod­ucts with­out look­ing close­ly at mar­ket pat­terns. To the extent that a deal between the EU and Mer­co­sur absorbed some of Brazil’s soy exports, or Argenti­na’s beef exports, or Uruguay’s dairy exports, reduc­ing sup­ply on inter­na­tion­al mar­kets out­side the EU, exporters such as Aus­tralia and NZ who have very lim­it­ed shares of the EU mar­ket could well find them­selves much bet­ter off. World mar­ket prices would rise due to the dis­ap­pear­ance of the com­pet­i­tive Mer­co­sur prod­uct, more than com­pen­sat­ing them for any dis­place­ment of their sales to the EU.

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