From the speech given in Sao Paolo (Brazil) during the conference "EU-Brazil: Realities and expectations of a transatlantic relationship" in December 1999.

The European Union and Mercosur, a marriage or a free union? Relations between these two entities have undergone a significant phase of development during these two years, both on an economic and a political level. However, after this happy period of free union, we may ask ourselves whether the issues within the marriage, and the various disputes in the same, may not undo this ties and even do away with the current formula. Personally, I am in favor of drawing up a full and reasonable marriage contract and I am gratified that the Rio summit has enabled me to publish this opinion to some extent, although within the framework of debate I think that it is interesting to remember the basis of the preferred questions. There is a new interest in the EU for Mercosur, and for Latin America as a whole; this interest dates back to the beginning of the '90s, and originates in the democratization of the Latin American regimes and the entry of Spain and Portugal into the EEC. Also, the EU is diversifying its relations towards the East, toward the Mediterranean countries and Southeast Asia. Europe has been holding talks with the Rio group since the Rome declaration on December 20th 1990. In 1994 the European Commission proposed a two phase strategy: the conclusion of an inter-regional framework agreement signed in 95 and the preparation of an association agreement. We are currently in the second phase, which I hope will bring a close union between the other two.

I will begin with an introduction to Mercosur, as seen from Europe, and will go on to describe the reasons why there is a need to move on to a more structured relationship. From the view point of Europe, Mercosur has a potentially important economy and its structure appears solid. Despite its weaknesses, it appears to have overcome the financial crisis which arose out of the Asian crisis. lts relations with the EU are already at this time significant and fruitful. Including the associated members, Mercosur represents around 65% of the GDP of Latin America, with more than 200 million inhabitants. lts constituent countries are in a period of strong growth, with this growth even if this growth may have been lesser than predicted, following the financial crises of 97 and 98. lts opening up to world trade in the nineties enabled the establishment of an important market for European industries. In tercos of GDP, Mercosur is today the fourth commercial union in the world. Mercosur is already a solid structure. Established by means of the Asuncion Treaty in 1991, it has a common customs tariff applicable to 95 percent of products, with the notable exceptions of information technology and telecommunications. It liberalized trade between zones for 90 percent of exchange products, with special regimes for the automobile and sugar industries. During the Montevideo Summit, the US decided to introduce the free exchange of services within a maximum period of ten years. This is point of attraction for the neighboring countries, Chile and Bolivia became associate members in 96 and 97. Mercosur signed a free trade agreement with the Andean community in 99. Its vocation is the development of common policies, and the creation of a single currency has been proposed. Mercosur without doubt still presents some weaknesses: the Brazilian monetary crisis, caused by the Asian and Russian crises, aroused protectionist tensions and revealed its institutional weaknesses. Mercosur is founded on a fairly uninstitutionalized structure and a consensus-based decision making process. In practice, disputes permeate the highest political levels. The automobile sector in 95, for example, or more recently the crisis between Brazil and Argentina this summer. As a result of the devaluation of the Real, Argentina had increased some tariffs, which endangered the development and driving force of Mercosur. However, Brazil and Argentina overcame this crisis, which shows a common political desire for integration. Relations between the EU and Mercosur have already had important effect: the EU is the primary economic partner of Mercosur, its leading supplier and first customer, ahead of the US. Imports from Mercosur have increased enormously during the decade of the nineties, whereas unfortunately, exports have remained low. The consequence has been the appearance of a significant trade deficit with the rest of the world and correlationally a considerable trade surplus for the EU. In favor of the economic opening up, decided at the beginning of the decade, the EU became the primary investor of Mercosur in terms of Stock. The US maintain 36% of the total Stock, and the EU just 30%. The EU became the first investor in public aid for the development of the countries of Latin America and the whole of the Caribbean (an average of almost 3 billion dollars per year during the years 96 and 97). While this aid became focused on the Andean and Central American countries, more underdeveloped than the others, the Mercosur countries and Chile received no more than 10% of EC funds. These economic developments confirm the deep affinities rooted in history: the ideals of the French revolution, the Latin culture, the similarity of the legal system to the European model, etc. The two areas coincide in their approach to social issues. The sharing of concerns regarding the globalization of exchange entails, purely and simply, the reaching of a principle of social justice and solidarity, but also solidarity in the struggle against poverty which continues to be a priority.

Beyond the conquest of market shares, the issue is the joint defense of a vision of the world which is not exactly that of our American friends and neighbors, who would like to spread their own model throughout the planet.

These verifications are encouraging. However, we Europeans would be wrong if we believed that the "status quo" permits us to maintain relations at this level. There are extreme differences between the EU and Mercosur, (of which you are already aware) in the agricultural exchange sector. Even so, and this will be my conclusion, these difficulties should not be an obstacle to the negotiation of a long-lasting association agreement. In the beginning, the Europeans could not detach themselve fits from this recent relationship. Initially, there are no guarantees that the good results shown in terms of trade will continue. Mercosur runs the risk of becoming a member of the American project which will create, in 2005, a free trade area which will cover the whole of the Latin American continent, known as the ALCA. The integration of Mexico into the NAFTA (North American Free Trade Agreement) had very negative consequences in terms of exchange between the EU and Mexico. The EU lost half of its market share in two years. This precedent should encourage Europeans to move forward in their relations with Mercosur, since the "status quo" can lead to no more than a step back. There are differences between the EU and Mercosur, in various aspects of trade negotiations concerning, for example, agriculture, textiles, intellectual property, the environment, and differences may emerge at the heart of the World Trade Organization. The Mercosur countries are great agricultural powers; some of their productions compete directly with some European ones. Their agricultural exports to the European Community represent around 52% of agricultural exports as a whole. In this field the EC suffers a significant deficit with respect to their agricultural exports to Mercosur. Brazil, Argentina and Uruguay feature among the eight leading world meat exporters; Argentina exports half of its production of cereals and Brazil is the second largest world poultry exporter. These productions are undeniably competitive. South American prices are lower than those of the European Community. It is also true, however, that these countries are silent on the subject of US aid for their agricultural production, which is considerably higher when added up, but which remain hidden. Also, these exports of industrial products from the EU to Mercosur are the object of considerable protective measures, which are exceptional in the process of the application of Common Customs Tariffs. The Mercosur countries have signed agreements on the trade of services but they remain much less open than the EU which has, in reality, an important potential for export in this sector.

As you already know, I do not like to overlook the fact that France has paid special attention to future free trade agreements in the agricultural sectors. The fundamental issues from it's point of view were the schedule of negotiations: they can start neither very late nor very early. Not very late because the objective is to finish before the fine tuning of the ALCA; not too early, to be able to ensure good coordination with the WTO negotiations which have just begun in Seattle under difficult conditions, as you are weIl aware, and where Europe may count, in certain aspects, on the solidarity of Mercosur. At the Rio Summit, whichever way you look at it, the Europeans and the Mercosur countries established some satisfactory guidelines. Negotiations began in 99 on non-tariff issues. Al! that relates to the dismantling of tariffs and the liberalization of services will be tackled from July 2001 onwards. The CAP (Common Agricultura! Policy), reformed in Berlin, constitutes the basis for European negotiations which will deal with the agricultural system. The economic and political association agreement will comprise a single agreement and will only end when the tariff and nontariff negotiations are ready. On these bases, I believe that there is great potential for success in the negotiations between Mercosur and the EU. They do, without doubt, depend to a considerable extent on the WTO negotiations. Europe, the United States and Latin America are united in their desire that the WTO series be a short one — three years -, but in the eyes of the United States this terms does not constitute a deadline.

Dealing as it does with an agricultural issue — the elements are in place for a favorable conclusion - there is also the pressure generated by a final mechanism for free trade between the EU and Mercosur, which should not be underestimated, and the differences in agricultural prices should be reduced with the implementation of the decisions taken by the Berlin European Council, and the increase in the living standards in Latin America. Additionally, the potential for agricultura] exports from Latin American countries to Europe should also, as a result of the growth effect forecast for agricultura! trade between the Mercosur countries, be progressively reduced, and exports to Asia should develop.

It should also be considered that the liberalization of agricultural exchange, if the same is decided on, would be staggered, as you are aware, from the time of the signing of the agreement and during the course of around ten years, that is to say, until 2015. So this issue, which is a weighty one and which cannot be ignored, is little by little, developing in a favorable direction.

It is, then, on a note of optimism that I close this speech, which as you have seen, does not favor any part in particular, neither Europe nor Mercosur. Trade negotiations are difficult, and for a rugby fan such as myself, a rough game, but they can also be loyal and brotherly. We are building more than a trade agreement. The countries of Europe and Latin America share a community of origin and values, alongside a common philosophy, they share the same vision of man: a policy of openness, pacifism and democracy, fairness and solidarity, where each one, citizens and countries, find their place.