When Mercosur finally holds its much delayed summit in Venezuela at the end of the month following two postponements (12 December and 17 January), besides its normal agenda of agreements and disagreements, it will have to address a new challenge, this time from the European Union which has redefined its development support policy, leaving all Mercosur members, except Paraguay out of its tariffs and market access benefits.
Under the new EU rules as of this year high middle-income countries, as defined by the World Bank will no longer be sheltered by the Generalized System of Preferences, which will be redirected to benefit the development of the poorest of the poorest in the world.
Under the former implementation, the countries now left out benefitted with 32% of the preferences system, and also presented a growing competition in certain sectors to a European Union, suffering the consequences of several years of recession, budget cuts and unemployment.
Now the number of countries benefitted with special access to the 500m consumers in Europe will be cut from 177 to 90, those which exporting to the EU will help them develop and integrate international markets. Among countries that will remain in the shorter list in Latam are Bolivia, Colombia, Costa Rica, Ecuador, Guatemala, Honduras, Nicaragua, Panamá, Paraguay, Peru and El Salvador.
However another 67 will continue to have some trade benefits with the EU but not under the GSP (started in 1971) but under specific trade agreements, while another twenty are definitively out, such is the case of Argentina, Brazil, Cuba, Uruguay, Venezuela.
According to the EU under the new system 58bn dollars in Euros of imports will have access to the European market. The amended GSP has three levels: a first one with 66% tariff reductions and represents almost 70% of the whole package (approx 40bn Euros). A second category is even more generous and is linked to the abidance of international conventions in the fields of human rights, labor rights, environment and good governance. This is believed to engulf an estimated 4.9bn dollars in exports to the EU.
Finally under the third category “All but weapons”, benefits 49 less developed countries with free access and no tariffs for all produce with the exception of arms and munitions, and covers 99% of all tariffs with 21% of preferences and equivalent to an estimated 12.4bn Euros in imports.
Brazil and Uruguay have admitted that the new system will hit hard on certain export sectors, but Argentina has yet to be more specific.