Diverging EU Trade Strategies in Latin America External ... · Diverging EU Trade Strategies in Latin America External Challenges and Internal Debates 2 1.1 Introduction 1 The European

Contact Information: Aukje van Loon, Research Associate, Chair for International Relations,

Ruhr University Bochum GC 04/707, 44780 Bochum, Germany. E-mail: [email protected]

Diverging EU Trade Strategies in Latin America

External Challenges and Internal Debates

Aukje van Loon

Chair for International Relations

PhD. Supervisor: Prof. Dr. Stefan A. Schirm

Ruhr University Bochum, Germany

Paper prepared for the 5

th ECPR General Conference

10–12 September, 2009

Potsdam, Germany

Section 51: The European Union and International Institutions

Panel 500: The EU and Regimes in the Global Political Economy

Draft version – Please do not cite or circulate without permission of the author.



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1.1 Introduction1

The European Union2 (EU),

as the most integrated and sophisticated regional actor in

global governance (Telò 2009), also constitutes the largest trading actor in the world. It is the

world’s leading exporter and second-leading importer of goods and it is the leader in both

exporting and importing trade in services.3 A key feature of EU trade strategy is the

combination of multilateral, interregional and bilateral approaches to international trade

negotiations4 (Elsig, 2007a). While on the one hand, it has been one of the strongest advocates

of a multilateral approach to trade liberalisation, the EU has paradoxically also developed an

extensive network of preferential trade agreements (PTAs). Hence, the EU is “not only a

formidable power in trade [i]t is also becoming a power through trade” (Meunier and

Nicolaidis, 2006: 907).

One can distinguish between two types of discriminatory EU international trade

strategies, i.e. between those of an interregional and of a bilateral nature. In the case of the

former, the EU currently maintains either “strategic partnership relations”, “equal basis

relations” or other types of trade relationships with most regions in the world (Hänggi 2006:

35). On the other hand, for a long time, the EU’s bilateral trade strategy (concluding bilateral

trade agreements with specific countries), played second fiddle to the EU’s rhetorical

commitments to multilateralism and interregionalism. However, in October 2006 this policy

was abandoned in the “Global Europe” communication, which stressed the importance of

strengthening bilateral trade relations with a set of carefully targeted emerging markets

(Heydon and Woolcock, 2009). This trend towards discriminatory trade agreements appears

to be increasingly relevant as a new round of regionalism is widely expected to take off

among WTO members, and “will further fuel the trend toward preferential

agreements”(Dieter 2008: 2) following the renewed failure to conclude the multilateral Doha

Development Round (DDR).

Concerning the significant role the EU plays “in international trade governance and

the importance of trade agreements for the EU’s development, it is remarkable how little

research has been undertaken on the EU’s role in international trade negotiations” (Dür 2006:

363), especially regarding specific regions in the global political economy. Scholars are

1 I would like to thank Prof. Dr. Stefan A. Schirm for valuable comments and advice. For providing significant

information on the EU-Chile FTA, I would like to thank Dr. Maria Garcia. 2 Legally, responsibility for external trade policy remains with the European Community (EC) until ratification

of the Lisbon Treaty. After successful ratification the EU will be responsible for external trade policy. However,

for simplification purposes reference will be made to the EU throughout this paper. 3 http://stat.wto.org/CountryProfile/WSDBCountryPFView.aspx?Language=E&Country=E27 (18.06.2009)

4 The terms bargaining and negotiation are used interchangeably.



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significantly paying attention to EU foreign policy decision-making, especially regarding

political and economic external relations, (Peterson and Sjursen, 1999; White, 2001; Smith,

2002; Knodt and Princen, 2003; Aggarwal and Fogarty, 2004; Tonra and Christiansen, 2004;

Bretherton and Vogler, 2006; Carlsnaes et al., 2004; and Smith, 2008). Consequently, an

increasing notice has been paid to the relations between the EU and Latin America (Valladão,

1999; Schirm 2001; Grabendorff and Seidelmann, 2005; Santander, 2008). Existing works on

EU foreign policy seem to devote contributions to this region frequently in comparison with

its African, Asian and Eastern European counterparts (Edwards and Regelsberger, 1990;

Holland, 2003; Smith, 2002; Aggarwal and Fogarty, 2004; Santander and Ponjaert 2009).

There has been substantial academic interest in the EU’s relation with MERCOSUR (Bessa-

Rodrigues, 1999; Bulmer-Thomas and Page, 1999; Sánchez Bajo, 1999; Müller-Brandeck-

Bocquet, 2000; Klom, 2003; Faust, 2004; Gratius, 2005; Santander, 2005; Doctor, 2007; and

Mukhametdinov, 2007) or in relation with its American counterpart NAFTA (Schirm, 1997).

However, EU’s relations with individual Latin American countries, Mexico and Chile in

particular, appears to have been particularly ignored, perhaps because in most of the literature

Mexico is considered a subset of NAFTA and Chile is considered a subset of MERCOSUR.

Yet it was with both Mexico and Chile that, after one and two years respectively, the EU

signed its most comprehensive free trade agreements (FTAs) to date with any third country.

As such it is astounding that little research has been conducted on bilateral trade relations, the

EU-Mexico and EU-Chile FTAs, either in a comparative perspective (Dür, 2007; Domínguez,

2006) or taken individually (Busse et al., 2000; Zabludovsky, 2001; Zabludovsky and Lora

2005; Szymanski and Smith, 2005; Garcia, 2009) or especially in comparison with its

interregional counterpart, the EU-MERCOSUR FTA.

1.2 Diverging EU Trade Strategies in Latin America – Empirical Puzzle

The EU and the Mercado Comun del Sur (MERCOSUR)5 member states signed the

EU-MERCOSUR Interregional Framework for Cooperation Agreement (EMIFCA) in 1995

which was to be the official start of trade negotiations towards an Interregional Association

Agreement (IAA).6 The first trade negotiation round started in April 2000 and after sixteen

rounds of negotiations this interregional relationship has been in stalemate with the IAA far

from being concluded (see Figure 1. ‘Chronology of the EU-MERCOSUR Trade

5 MERCOSUR was created in March 1991 by Brazil, Argentina, Uruguay and Paraguay (Treaty of Asunción).

6 Previously, on 29

th of May 1992, EU and MERCOSUR signed the Inter-Institutional Cooperation Agreement

with focus on EU promotion of technical assistance to support the MERCOSUR integration process.



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Negotiations’). On the other hand, EU’s bilateral trade relations with two other countries in

the region, Chile and Mexico, have been proposed, negotiated and concluded rather fast.

Trade negotiations between the EU and Chile started in April 2000 and were concluded in

2002 after ten rounds of trade negotiations (see Figure 2. ‘Chronology of EU-Chile Trade

Negotiations’). Especially, the EU-Mexico Free Trade Agreement (EUMFTA) was, after only

nine rounds of trade negotiations between November 1998 and November 1999, successfully

concluded (see Figure 3. ‘Chronology of the EU-Mexico Trade Negotiations’). The EU-

Mexico FTA was announced “the first, the fastest and the best” (Lamy, 2002a) and the FTA

with Chile “is a XXI century model of [future] trade relations” (EC 2002b: 1) because it

involves “the most ambitious and innovative results ever for a bilateral agreement by the EU”

(Lamy, 2002).7 Both FTAs are referred to by the European Commission (EC) as “the most

modern and comprehensive [political, economic and cooperation FTAs] in the global

economy” and both set a paradigm for future trade agreements.8 This concludes that these two

diverging EU trade strategies in Latin America, interregional and bilateral, show a great

variation in outcomes (dependent variable). Thus, the empirical puzzle is as follows;

Why has the European Union interregional trade endeavour with MERCOSUR failed

whereas its bilateral trade strategies with Mexico and Chile have been successfully

concluded?

Hence, this paper will focus on EU trade strategies in Latin America. As mentioned

above, three specific reasons account for focussing specifically on EU external trade relations

in this region. First of all, of particular importance is that the EU has applied both of the

above-mentioned types of discriminatory trade strategies in this region; the interregional and

bilateral approach, secondly, the application of these trade strategies occurred in a

simultaneous time-frame and thirdly, the outcomes of these three trade strategies vary greatly

which makes investigating the interaction of the EU with a regional organisation,

MERCOSUR, and two individual countries, Mexico and Chile, within that region of great

interest. Also of importance is that academic attention, when applied to regional integration

within Latin America, takes a particular Eurocentric perspective. Investigations of

international trade negotiations can only acclaim part of the process and outcome when

7 The EU-Chile FTA covers ‘WTO-plus’ issues; 90 percent of trade liberalisation in all sectors but most of all it

includes the Singapore issues (competition policy, investment, transparency in government procurement and

trade facilitation) and issues such as intellectual property rights, services and public procurement. 8 http://ec.europa.eu/trade/issues/bilateral/countries/chile/index_en.htm



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attention has been put on only one side of the ‘negotiation table’. Thus, this paper wants to

make a novel contribution by first of all, comparing and contrasting EU trade agreements with

MERCOSUR, Chile and Mexico, and by, second of all, taking the counterpart perspective

into account. Accordingly, the objective of this paper is not only to explain the variation in

outcomes of diverging EU trade strategies in Latin America and to compare the interregional

approach applied by the EU with its bilateral trade strategy, it thereby also explains the role of

the EU in international trade negotiations. By taking a political economy approach, it seeks to

compare the two types of trade diplomacy in terms of preferences and power relations,

decision-making and negotiation, and the influence of these factors on trade liberalisation.

The central argument of this paper is that variation in outcomes of EU international trade

agreements can best be explained by three causal considerations; the economic preferences9

of (trans-) national interest groups, the relative bargaining power of states and the role of the

chief negotiators (independent variables). Therefore, three questions can be asked: how much

do (trans-) national preferences contribute to the outcome of international trade negotiations?

How much do distributional consequences and asymmetrical bargaining contribute to the

outcome of international trade negotiations? How much does political entrepreneurship

contribute to the outcome of international trade negotiations?

1.3 Theoretical Framework - Three-Level Games

This paper uses Robert Putnam’s (1988) approach of two-level games (adapted to a

three-level game) complemented by Moravcik’s liberal intergovernmentalism. Putnam’s

seminal article focuses on the case study of the Bonn Summit of the G7 in 1978 and not the

international trade negotiations of the EU. At the time of writing, the international system was

characterised by a bipolar structure and as such theoretical debates were dominated by

systemic theories. These theories had difficulties in explaining international negotiations

involving multiple actors at different levels. Putnam’s metaphor of two-level games, by

contrast, opens up the ‘black box’ of the state by focussing on the interaction between various

players instead of analysing only one level or a sequence of levels.

9 Here, the term preference is used instead of the term interest. Interests and preferences need to be

differentiated which shows that the latter derives from the former (Baumgartner and Leech, 1998; Frieden, 1999;

Milner 1997; Woll 2008). Interests are fundamental goals such as maximising income for economic actors and

maximising chances to retain in office for political actors. These fundamental interests hardly change whereas

preferences are variable. Preferences are the strategies applied to achieve the (basic) interests; policy preferences

or policy choices are specific preferences which “entails choosing an instrument with which the actor hopes to

achieve the strategic goal” (Woll 2008:34).



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“At the national level, domestic groups pursue their interests by pressuring the

government to adopt favourable policies, and politicians seek power by

constructing coalitions among those groups. At the international level, national

governments seek to maximize their own ability to satisfy domestic pressures,

while minimizing the adverse consequences of foreign developments” (Putnam

1988: 434).

However, a ‘simple’ two-level approach lacks the intermediate layer needed for an

explanation of the behaviour of the EU in international trade negotiations. Intra-EU

negotiations and compromises usually take place before the EU enters the international scene

and these involve a pyramid of preferences ranging from the private sector over domestic

politics up to the ‘European interest’ deduced in the Council of Ministers. The EU acts as a

single actor within the World Trade Organisation (WTO) based on its Common Commercial

Policy (CCP). The EU’s common negotiation position, its ‘single voice’ is the result of

intense internal negotiations, where member states have to agree on positions that are both

acceptable to their own domestic constituencies and ‘winning’ on the international stage.

Delegation of trade policy-making in the EU occurs on two levels. At the first level of

delegation individual member states have delegated trade authority to the collective Council

of Ministers. The Council’s policy positions evolve along national lines as domestic interest

groups address their interests to national governments. Heads of state and government meet

formally (once every six months) and these meetings are prepared by the Committee of

Permanent Representatives (COREPER) and working groups which are composed of national

experts. It has been empirically investigated that the members of the Council of Ministers are

primarily interested in domestic outcomes of EU policy implementation followed by the

significance of expert knowledge on market integration (Eising 2007). A second level of trade

policy delegation is conducted from the Council of Ministers to its negotiating agent, the

European Commission (EC). Before trade is being negotiated between the EU and third

countries, this body drafts a proposed negotiating mandate. In a special committee (Article

133 Committee), which examines and amends negotiation proposals, the Community’s

objectives are being discussed before passing them on to the COREPER. Then the General

Affairs Council (composed of member states’ foreign ministers) examines and finally hands

out a negotiating mandate to the EC.

Hence, the EC conducts international trade negotiations, within the limits set by a mandate of

the Council of Ministers which at the end of negotiations approves or rejects international

trade agreements (Bayne and Woolcock, 2007).



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In EU trade policy literature, participation in international trade negotiations is

increasingly referred to as a three-level game, involving the national, the EU and the

international level. Although, some have theoretically applied three-level games (Patterson,

1997; Collinson, 1999; Deutsch 1999; Frennhoff Larsen, 2007) however, in practice, the

tendency of scholars has been to treat the positions of the EU member states as given which

reduces the game of three levels to a two level-game with the national level being treated as

the European level. The simplification of such analysis is defended by most scholars referring

to the state being a unitary actor and thus its negotiation position reflects the preferences of

the national level. In his national preference formation, Moravcsik (1998) accounts for the

domestic position as given as he assumes the state being a unitary actor where focus is put on

the aggregation of member state positions (EU Level II) into a common negotiating position

(International Level I). Although using a liberal (intergovernmental) approach to international

politics, this does not however open the ‘black box’ of what happens domestically within a

nation state; i.e. which economic preferences dominate and how these are being aggregated

into government or member state positions. Another argument for ‘skipping’ the domestic

level has been justified by the fact that member state positions have been fairly stable

whereby these states are consequently divided into the ‘liberal North’ or the ‘protectionist

south’ or ‘Club Med’ countries (Ahnlid 2005: 134; Nguyen, 2008). These analytical shortcuts

however, do not account for different trade outcomes regarding divergent trade strategies

“concerned with the interaction between international and domestic factors and between

economic and political concerns [i]t makes no sense to assume that states are unitary actors,

that negotiators have full knowledge of national policy preferences or that these preferences

will be steady and not affected by market developments” (Bayne and Woolcock 2007: 5).

Therefore, not only one level or a sequence of levels should be analysed but each of the three

levels should be analysed individually.

By applying Putnam’s two-level games and adapting it to a three-level game model

(Table 1.) this paper offers insights on the EU’s external trade relations through explaining

the entanglements and shortcomings of the EU-MERCOSUR negotiations on the one hand

and the successful concluded EU-Chile and EU-Mexico trade agreements on the other hand.

The ‘classical’ case of bilateral EU negotiations with a single country, Mexico and Chile,

where the single country applies a two-level game approach (National Level II and

International Level I) in contrast to the EU which applies a three-level game (National Level

III, EU Level II and International Level I) will be investigated. The region-to-region



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approach, the international trade negotiations of complex interregionalism (Hardacre and

Smith, 2009) increases the analytical and political complexity by adding another level for

both the EU (National Level III, EU Level II and International Level I) and the same for

MERCOSUR (National Level III, MERCOSUR Level II and International Level I). This

political complexity has led to the EU being referred to as a ‘conflicted trade power’ (Meunier

and Nicolaidis, 2006) mainly because the heterogeneous preferences of interest groups lead to

differing views among the EU governments regarding trade liberalisation. Due to the fact that

these preferences need to be aggregated twice (at the national level and the EU level) “the

struggle for power and the search for internal compromise becomes crucial (Milner 1997: 11).

However, internal division can lead to united collective representation. The question is

whether this has been the case in the EU-MERCOSUR, EU-Mexico and EU-Chile FTAs?

Also, to account for international trade outcomes and the variance in their outcomes it is

essential to also consider the characteristics of the counterpart actors with which the EU

engages. Actors investigated are, specifically Argentina and Brazil for MERCOSUR and the

counterpart states Mexico and Chile, in order to determine which factors have an effect on

shaping both the interregional and bilateral decision-making processes and outcomes. The

goal is to identify the main explanatory factors to then to consider which of these are most

important. Thus, as shown in Table 1, possible explanations for interregional and bilateral

trade outcomes fall into the broad categories of both EU and counterpart characteristics (trade

policy profiles). Of these two categories, EU characteristics are more directly comparable

across cases, as the same sets of public and private actors exist. Counterpart characteristics are

less directly comparable given the political and economic diversity both across and within the

counterpart regional organisation and counterpart countries. These broad categories of EU and

counterpart characteristics include the independent variables; preferences, power, and

coherence. The core argument here is that the divergent outcomes of interregional and

bilateral trade strategies can be attributed to three conjunctions; one of interest group and

government interaction (societal approach); one of state-state interaction (intergovernmental

approach); and one of counterpart characteristics (the international approach).

1.3.1 Independent Variables

In the analysis of the political economy of international trade negotiations no

individual theoretical approach has a monopoly on wisdom or truth; “there is no single theory

of economic [trade] diplomacy that can provide answers on how states, under given



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circumstances, will conduct policy” (Bayne and Woolcock, 2007: 5). Regarding EU trade

policy, four sets of issues are crucial to understanding EU trade politics (Milner 1999: 93).

These different issues may, individually and/or collectively, offer valuable insights. Of

importance here are first of all the trade policy preferences of domestic economic interest

groups (Grossmann and Helpman, 2002; Grossman, 2004; Dür, 2008). Secondly, political

institutions, particularly on the EU level are of importance as the trade preferences of the

national level are aggregated and translated on this ‘intermediate’ level (Milner, 1997). A

third central issue is the importance of the European Commission as the sole negotiator of EU

trade policy (Elsig, 2007b). Finally, the international political environment influences

international trade politics. These crucial issues to understanding EU external trade policy

will be applied below in a three-level games model. Thus, specific political-economic

variables (preferences, power, and strategies) on three levels are being highlighted:

� III. National Level: Preferences (national economic interests): material economic

gains or losses of national interest groups which are altered positively or negatively

due to the liberalisation of trade.

This level takes a societal approach to governmental preference formation. According to the

liberal theory of international relations; those interests best able to impose their individual

preferences, or the compromise preferences of an aggregated grouping on trade policy, will

see these preferences reflected in trade policy toward other regions or countries.10

The

preferences of member states at the national and EU level, and their positioning of these in

international trade negotiations, are key determinants of the zone of agreement (Odell, 2000)

at the international level.11

Moravcsik also has contributed significantly to the debate on

domestic influences regarding foreign policy-making including trade as he focuses on the

internal influences on international politics and negotiations.12

He takes the position that

cooperation among states is influenced by ‘domestic distributional consequences’ and

underlines this by his definition of commercial liberalism as it “stresses the impact on state

behaviour of gains and losses to individuals and groups in society from transnational

10

“Liberal IR theory, elaborates the insight that state-society relations – the relationship of states to the domestic

and transnational social context in which they are embedded – have a fundamental impact on state behaviour in

world politics” (Moravcsik 1997: 513). 11

Although preferences are of significant importance, the zone of agreement can be influenced by other factors

such as side-payments, issue-linkage and coalition-building. Odell’s ‘zone of agreement’ is equal to Putnam’s

‘win-set’ and Keohane and Nye’s (1977) ‘asymmetrical interdependence’. 12

It should be noted however, that Moravcsik focuses primarily on the influence of domestic politics on treaty

formation rather than on economic policy-making. An exception here is his 1991 work on the Single European

Act (Moravcsik, 1991).



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economic interchange” (Moravcsik 1997: 515). The relationship between state and society is

a relationship of supply (society) and demand (state). The state depends on the ‘assistance’ of

interest groups in formulating and implementing policies by supply of specific resources. The

state demands exchange of information, both technical and political, from interest groups.

These, on the other hand, have an interest in influencing policy formulation and

implementation and thus seek direct access to the state. Public officials concerned with

electoral performance then in turn supply policies beneficial to interest groups. Although the

state is a representative political institution or representation, which is used as a “transmission

belt” where preferences and power of interest groups are translated into foreign trade policy,13

it is however unable to represent all interest groups equally. Therefore, political biased

representation is the norm as governments represent some interest groups more than others.

This leaves some interest groups privileged over others by being more involved in the

political process of national preference formation and decision-making. Concerning trade

protection for example, this reflects pressure from powerful domestic interest groups.

However, in part, this power results from biases within the political representative

institutions. This means “that states do not automatically maximize fixed, homogeneous

conceptions [but rather] they pursue particular interpretations and combinations of security,

welfare and sovereignty preferred by powerful domestic groups enfranchised by

representative institutions and practices” (Moravcsik 1997: 519). Of importance here is that

the state can decide which interest groups to represent and how representation takes place

(state autonomy), thereby determining whose social preferences dominate state policy.14

� II. EU / Counterpart Level: Preferences (transnational economic interests): material

economic gains or losses of transnational interest groups which are altered positively

or negatively due to the liberalisation of trade.

Power (control over negotiation agenda): the extent to

which states can shape the form and outcome of a trade strategy in order to balance

both competing demands from both national and transnational interest groups as well

as the intra-bargaining process on the EU/Counterpart level.

This level takes an intergovernmental approach to (inter-)state bargaining; an intra-EU

bargaining game where Level III and Level II national and transnational interests result into

13

Within the international system the state is an actor but within the domestic political setting it is an institution

of representation (Moravcsik 1997:518-520). 14

See republican liberalism Moravcsik 1997: 530-533.



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state preferences and the relative state bargaining power results in the outcome of

international negotiations. This intergovernmental approach focuses on issue-specific

distribution of bargaining power (policy interdependence), which in turn reflects the

relationship between preference intensity (asymmetrical interdependence). “Policy

interdependence is defined here as the set of costs and benefits created for foreign societies

when dominant social groups in a society seek to realize their preferences, that is, the pattern

of transnational externalities resulting from attempts to pursue national distinctive purposes”

(Moravcsik 1997: 520). Of importance is the relative intensity of national preferences, the

value a state puts on an agreement, which decides whether it is willing to make concessions.

The asymmetrical interdependence and the opportunity for issue linkages provides the

foundation for an intergovernmental analysis of distributional conflicts among governments”

(Moravcsik 1993: 480). Governments gaining the most from international trade outcomes

compromise the most by offering the most significant side-payments or concessions in order

to achieve successful outcomes. Each state aims to accomplish its specific preferences while

being under pressure from other states’ preferences. This occurs through an intra-EU

bargaining game.

In what way do power considerations within the EU and within the counterpart affect the

willingness of all members of the region to engage in interregional/bilateral relations? How

do possible power asymmetries between the counterpart and the EU affect the former’s

attitudes towards negotiations and possible agreements with the latter? Due to the benefits of

asymmetrical bargaining the EU can sustain more control over the negotiation agenda than its

negotiation partner (Chile or Mexico). In international trade strategies where the EU enjoys

greater negotiation leverage, the EU is better to control the direction and substance of trade

agreements with these countries. For example, the EU is better to control sectoral exclusions,

escape options and selective liberalisation processes which diminish national and

transnational opposition of import-competing industries.

� I. International Level: Chief negotiator’s bargaining strategies

Details regarding the nature of negotiations will be investigated to explain the effect that

particular aspects of the negotiation progress has on trade outcomes.

These three levels show that specific major problems, in both interregional and

bilateral trade negotiations are a) divergent (trans-) national economic interests and b) the

control over the negotiation agenda and c) negotiation strategies. By focussing on these



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variables an investigation of the process of region-to-region and region-to-country interaction

explains how these variables are associated with a particular variance in trade outcomes and

which either one, or a combination of these, carries more weight regarding unsuccessful or

successful conclusion of international trade strategies.

1.4 EU Characteristics:

The paper explores more in detail the conduct of the EU in the highly sensitive issue

area beyond trade; agriculture. This is an interesting case where deep differences in

preferences among EU member states may result in tensions at the European level, provoking

deadlocks in international negotiations. Eight case studies will be investigated; for the EU

(France, Germany, UK and Spain) and for MERCOSUR (Brazil and Argentina) and the two

individual countries, Chile and Mexico. France, Germany and the UK are the largest

economies in the EU and with the highest number of votes (followed by Spain) in the

European Council they are the most influential EU members.15

France and Germany in the

EU and their respective counterparts in MERCOSUR are viewed as the driving forces of

European integration. Regarding trade liberalisation in agriculture, member states’

preferences are based on two criteria; their total share of agricultural production and total

amount of direct payments received from the Common Agricultural Policy (CAP). Trade

liberalisation of agriculture will open up markets which essentially will lead to fewer

subsidies and more CAP reforms. Three distinct groups of countries can be distinguished

regarding liberalisation of agriculture: the supporters, the ‘mixed preference position’ and the

opponents.

Of the chosen EU case study countries, the strongest opponents regarding trade liberalisation

in agriculture are France, and Spain. These countries are against further CAP reforms and in

favour of import protection through export subsidies and domestic support payments. Within

the EU, France is the largest producer and exporter of agricultural goods (20.3%) followed by

Italy (14.2%), Spain (12.7%) and Germany (12.6).16

France also receives the highest amount

of direct CAP payments (7, 6 million Euro p.a.) followed by Germany (5 million Euro) and

Spain (4, 4 million Euro). Supporter of agricultural trade liberalisation is the UK, it has a

15

The number of votes allocated to EU member states reflects the size of population: France, Germany and the

UK each have 29 votes and Spain has 27 votes. When the Council of the European Union (Council of Ministers)

and the President of the Commission meet then this summit meeting is called European Council. 16

See http://ec.europa.eu/agriculture/publi/capexplained/cap_en.pdf (Access 12 June 2008).



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relatively small agricultural sector which is of small significance within the economy as a

whole. The country with a ‘mixed-preference’ position towards agricultural liberalisation is

Germany. On the one hand, this country supports the opponents of trade liberalisation in

agriculture, but on the other hand, regarding CAP reform towards ‘Southern’ agricultural

products (wine, fruit and vegetables) it is in support of agricultural liberalisation.



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Table 1: Theoretical Framework: EU / Counterpart Characteristics of ‘Three-Level Games’

EU Characteristics Counterpart Characteristics

(trade policy profile) (trade policy profile)

Interregional Trade Agreement Bilateral Trade Agreement EU MERCOSUR EU-Chile, EU-Mexico

III. National Level III. National Level II. National Level Intra-State Level

Preferences Preferences Preferences

(National economic (National economic (National economic

interests) interests) interests)

Power

(Intra-state bargaining)

II. EU II. MERCOSUR Interstate Level Interstate Level (Intra-EU) (Intra-MERCOSUR)

Preferences Preferences

(Transn. economic interests) (Transn. economic interests)

Power Power (Intergovernmental bargaining) (Interpresidental bargaining)

I. International Level (EU and Counterpart)

Bargaining

Interregional Bilateral Trade Outcome Trade Outcome

Liberal Intergovern-mentalism

1. National Preference Formation (2. Intra-State Bargaining)

2. Interstate Bargaining

3. Institutional Outcome

Source: Based on Putnam 1988 and Moravcsik 1998.



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1.5 Counterpart characteristics

All counterpart case study countries (Argentina, Brazil, Chile and Mexico) have been,

and still are, engaged in a wide variety of external trade relations. However, each has taken a

different direction regarding to integrate itself into the global political economy, as each

liberalised trade to a different degree and in a very distinct manner which reflects the

differences in these countries political-economic trade policy profiles and external trade

strategies (Aggarwal et al., 2004b). “Economic relations are thus not only slowed down and

complicated by European internal policies but also reflect the failure of Latin American

countries to establish a common economic agenda and to accelerate integration at a regional

level” (Westphal 2005: 176). Brazil and Argentina took the regional direction and Chile and

Mexico concentrated on a distinct bilateral direction. Hence, of importance here are the

differences among the trade policy profiles of the case study countries in regional and

international trade governance:

Brazil: the regional leader17

is focussed on both the multilateral and interregional

trade level pursued through both (aggressive) individual and collective

regional activity (full member of MERCOSUR and since 2005 associate

member of the Andean Community of Nations, CAN). Brazil is an

emerging global and regional power, a member of the WTO and the

CAIRNS Group, a leader representative of the G20 group of developing

countries and signed a “Strategic Partnership” with the EU in July 2007.18

Argentina: the regional follower19

is focussed on trade relations both on the

multilateral and interregional level pursued through collective regional

activity (full member of MERCOSUR and since 2005 associate member of

17

Schirm defines ‘leadership’ “as the ability to make others follow goals and positions which these others did

not previously share and/or to make others support an increase in status and power of the emerging power”

Schirm, forthcoming. 18

Brazil is associate membership of CAN through the Union of South American Nations (UNASUR) and joined

the WTO in 1995. The CAIRNS Group was founded in 1986 and consists of states aiming to bring about

liberalisation of global trade in agricultural produce. The G20 was officially founded on 20 August 2003 by

twenty states (currently 23 members). The core leadership of this group is the G4 bloc, Brazil, India, China and

South Africa. 19

Schirm defines ‘followership’ “as supporting the goals and positions of another country which were not shared

previously and/or as accepting a relative loss of status and power vis-à-vis the emerging power” Schirm,

forthcoming.



16

the CAN) and is a member of the WTO, the CAIRNS Group and the

G20.20

Chile: the independent trader concentrates on all international trade forums

including unilateral trade liberalisation, multilateral, interregional and

bilateral levels. It participates in multilateral organisations such as APEC,

WTO and is a member of the CAIRNS Group and the G20.21

Since 1996,

Chile enjoys an associate membership status of MERCOSUR and since

2006, is an associate member of CAN (after having had a full and observer

member status) and it currently has 16 signed free trade agreements

including with the EU, the P4 Group, Japan, South Korea and a trade

agreement with India.22

Mexico the interdependent hub market actively concentrates on bilateral trade

relations and also has interregional trade agreements (full member of

NAFTA). Significant is its role as an emerging market economy, its active

membership of key multilateral economic forums, APEC, WTO and

OECD23

, its G20 membership and the signing of a “Strategic Partnership”

with the EU in July 2008. Mexico has an observer status with

MERCOSUR and CAN, currently has 13 signed free trade agreements

including the EU, Israel and Japan and since 2002 has an Economic

Complementation Agreement (ACE) with MERCOSUR.24

Among the Latin American countries to be investigated, Chile is the most significant

example of successful unilateral liberalisation. It started relatively early to implement free

trade and has pursued trade at both the multilateral, regional and bilateral level. With its

external trade strategy of an independent trader, Chile seeks to enhance its economic

competitiveness and minimises risks, complementary to seeking political leverage through

associated membership in regional blocs. Because of this, Chile enjoys great diversified

20

Argentina is associate membership of CAN through UNASUR framework and joined the WTO in 1995. 21

Chile joined the WTO in 1995 and Asia-Pacific Economic Cooperation (APEC) in 1994. 22

P4 Group consists of Chile, Brunei, New Zealand and Singapore.

http://www.sice.oas.org/ctyindex/CHL/CHLagreements_e.asp (Access 09 July 2009). 23

Mexico joined APEC in 1993, the World Trade Organisation (WTO) in 1995 and it is the only Latin American

country that joined the Organisation for Economic Cooperation and Development (OECD) in 1994. 24

http://www.sice.oas.org/ctyindex/MEX/MEXagreements_e.asp (Access 09 July 2009).



17

geographical linkages and has no strong dependency on anyone particular commercial hub

within the global political economy.25

“Chile has been true to its pioneer spirit by being the first in Latin America to

undertake the economic reforms which have brought it high, stable growth over a

long period. It is now showing the same spirit again by conducting an open

commercial policy, i.e. signing a whole range of bilateral liberalisation

agreements, joining Mercosur some time ahead and resolutely opting for the

active multilateralists’ camp in Geneva”.26

In the case of Mexico, the deepening of ties to the U.S. through NAFTA has enhanced

the country’s long-term political and economic prospects, but at the cost of increased

dependence on a single market and a more limited set of strategic options. By contrast, the

two bigger countries of the region, Argentina and Brazil gave first and foremost priority to

liberalising trade at the regional level through MERCOSUR. Cooperation through a regional

organisation allows these national economies to adapt more slowly to international

competition and gives them greater leverage to negotiate trade with other regional

organisations, such as the EU and NAFTA. The political and strategic advantages that

increase to Brazil from regionalism, and its ability to use the regional bloc it dominates as a

tactical advantage in negotiations with the EU and the U.S. and in other concerns, entail a

trade-off between economic efficiency and negotiating leverage. Finally, Argentina’s

commitment to regionalism has gained it limited political and strategic advantage, and the

protections MERCOSUR provides to several large regional industries (many dominated by

Brazilian companies) have cost Argentina in terms of economic competitiveness. While

MERCOSUR has benefited its members in many ways, in terms of promoting the emergence

of globally competitive industries, its record thus far has been disappointing, especially when

compared to Chile’s multilateral strategy.

Thus, the divergent trade policy profiles towards and trade strategies of these countries also

contribute towards the variation of trade outcomes.

As the objective of this paper is to explain the variation in outcomes of diverging EU

trade strategies in Latin America and to compare the interregional approach applied by the EU

with its bilateral trade strategy, first of all the external challenges which catalysed EU trade

relations with Latin America need to be highlighted. Consequently, in the empirical part of

25 A hub is a region or country which has signed several FTAs and its partners are spokes if they have not signed

FTAs between them. 26

Lamy 2000:1. http://trade.ec.europa.eu/doclib/docs/2004/december/tradoc_120813.pdf



18

this paper, I will first elucidate how the major interests on the national level of the parties

involved have been shaped and secondly I will deal with the intra-region and intra-state levels

of both the EU and its counterpart, and thirdly I will point out how international negotiation

pressures have shaped and influenced the chief negotiators on the international level, before

concluding.

2. External Challenges: Knock-On Effects

In December 1994, the European heads of state held a summit meeting in Essen,

Germany and approved a ‘Basic Document concerning the Relations of the EU with the Latin

American and Caribbean States’ in which they committed themselves to a close cooperation

with MERCOSUR, Chile and Mexico.27

This decision “was inconsistent with dominant EU

[multilateral] trade policy as the Commission’s Directorate General (DG) Trade was focused

on WTO negotiations and had discarded bilateral negotiations as too costly and time

consuming for the relatively meagre rewards offered in terms of enhanced trade and

investment” (Garcia 2009a: 3-4). Also, when Pascal Lamy was appointed Trade

Commissioner in 1999, he introduced a moratorium on FTAs in order to shift concentration to

the multilateral level and “as a reaction to the ad hoc blossoming of FTAs under his

predecessors”28

(Garcia 2009a: 9). However, “as part of the process of harnessing

globalisation” (Lamy 2000: 2) this moratorium was temporarily ‘frozen’ as trade policy

priorities had changed when closer ties were to be made between the EU and its Latin

American counterpart.

“In a significant shift of policy, the EU decided to move towards some form of

associated status with Mexico, Chile and Mercosur. Hitherto associated status had

been reserved for those states that either for historical reasons (ex-colonial states

of the Lome Conventions) or political reasons (the near abroad of East and South

Europe) had been considered of top foreign policy priority status for the EU”

(Peterson and Sjursen 1998: 161).

Strengthening strategic links with potential emerging Latin American economies and

(regional integration) competition with the United States seem to have provided a catalyst for

27 The European Council recommended the Commission and the Council “to create as quickly as possible the

conditions for an early opening of negotiations with the Mercosur States on an inter-regional framework

agreement, including a Memorandum of Understanding, and to put ideas on the future form of treaty relations

with Mexico and on the extension of relations with Chile into concrete form without delay”.

http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/00300-1.EN4.htm (Access 27 October

2008). 28

Lamy doctrine; highest priority given to WTO negotiations complemented with moratorium on negotiating

bilateral deals.



19

the EU to advance its relations with MERCOSUR, Chile and Mexico (McGuire and Smith,

2008). The timing of this decision is essential: 1994 was the year that NAFTA came into

effect, and the year of the Summit of the Americas where the concept of a Free Trade Area of

the Americas (FTAA) was proposed by US President Bill Clinton.29

Also, the US had planned

to negotiate an FTA with Chile (which was signed on 6 June 2003, only 6 months after the

EU-Chile FTA) and Chile expressed intentions to join NAFTA. The will of the US to expand

its economic power in the Latin American region with the creation of an FTAA reverberated

in the EU bloc. Some European countries feared that “the emergence of a US-led pan-

American bloc” (Santander 2005: 298) would lead to a loss of opportunity in opening access

for their products to the Southern Cone markets, and therefore their interest in concluding the

IAA with MERCOSUR increased. The EU-US rivalry caused by this ‘Atlantic triangle’ has

been described as30

:

“Two foreign gentlemen court the beautiful Latina. One, the European, is an old

rich gentleman, cultured, polite and of delicate manners, but a little slow and

hesitant. The other, the American, is a young billionaire, brave and adventurous,

but lacking in manners, and he can be at times harsh and even brutal in his

ways” (Valladao 1999: 29).31

Thus, EU motivations to initiate trade negotiations had been shaped by the “knock-on

effects” (Baldwin 1997: 870) of commercial (economic balancing) and geopolitical

considerations.32

The EU-Mexico FTA follows a classic argument in which the EU tries to

neutralise trade diversion due to Mexico joining NAFTA. EU trade with Mexico went into

decline when “EU’s share of Mexico’s total trade fell from 9% to 6.4% between 1993 and

1999” (Zabludovsky and Lora 2005: 6) and because of this the EU aimed to seek a NAFTA-

parity FTA with Mexico (Dür, 2007). Also, the potential trade diversion of an eventual

conclusion of the FTAA (Schirm, 2005) which was to encompass an FTA from Alaska until

Tierra del Fuego, was an incentive for the EU to commence trade negotiations with

MERCOSUR and Chile. A geopolitical consideration was to increase EU’s presence and

influence as an international actor in the ‘backyard’ of the US. A last, but not less important

29

This has sparked off debates that the EU is unsuccessful in the ‘agenda-setting’ of trade liberalisation. “It has

been a “follower” in a US-EU dynamic which has seen the US aggressively carry out “competitive

liberalization” with the EU either responding or not even doing that. At its best, the EU has reacted to US

initiatives rather independently staking out its own territory” (Sbragia 2007:2). 30

For more on triangular relations see Grabendorff 2005. 31

“La belle Latina est courtisee par deux gentlemen etrangeres. L’un, L’Europeen, est un vieux monsieur

fortune, cultive et avec des belles manieres, mais un peu lent, hesitant et pingre. L’autre, l’Americain, estun

jeune millardaire, audacieux et aventurier, mais mal eleve et meme un peu brutal” (Original quote). 32

Motivations to initiate FTAs can also include security considerations, such as the Euro-Med AAs.



20

motivation is institution-building; the EU’s desire to ‘export’ its regional integration model to

other regions in the world. Promotion of the European experience of economic and political

stability is actively pursued; however, interregional agreements involve strenuous

negotiations mainly due to the counterpart region’s moderate progress towards integration.

This inertia can be ascribed to member countries’ asymmetric levels of development and/or a

missing institutional framework (Malamud, 2008).33

“The relations of the EU and its member states with other groups of states are not

an accidental development. They are a direct result of the EU construction proper

and Europe’s own posture as a regional organisation. Therefore, the logic of inter-

regional cooperation derives from the successful European model.” (Alecu de

Flers and Regelsberger 2005: 319).

By promoting its own model to various regions across the world, the EU has established a

strategy where regional integration is at the core of external projection “to a world hungry for

its presence” (Söderbaum et al. 2005: 371). Thus, two significant goals are accomplished by

the EU, “to export its regional governance model and increase its reputation as an

international actor” (Santander 2005: 292).

Arguments for MERCOSUR, Chile and Mexico to negotiate Association Agreements

(AAs) with the EU were the following:

“a) to deepen the process of economic modernization and trade liberalization; b)

to end the discrimination in the Mexican [Chilean and MERCOSUR’s] market

against European investors and exporters as a result of NAFTA [and the FTAA],

and c) to improve the conditions for Mexican [Chilean and MERCOSUR’s]

exporters’ access to the European market” (Zabludovsky and Lora 2005: 3).

An important geopolitical consideration for the Latin American counterpart region and

countries was to counterbalance US presence and influence in the region. Here, relations with

the EU strengthens MERCOSUR’s position facing FTAA negotiations but also avoids

dependency on one specific trading partner (concerning the FTAA becoming reality).

33

Both MERCOSUR and ASEAN have similar difficulties regarding regional integration. One possible way to

overcome EU-MERCOSUR stalemate is to apply the EMIFCA to the region as a whole and then to negotiate

bilateral FTAs with the member states individually. This however, goes against the EU’s strengthening of

regional integration (institution-building) for which it provides technical, political and financial support.

However, against official EU rhetoric, the EU signed a ‘Strategic Partnership’ deal with Brazil in July 2007.

Whether this ‘single-out’ strategy will induce EU-MERCOSUR interregionalism is still to be seen.



21

2.1 The Road to EU-MERCOSUR, EU-Chile Association and EU-Mexico Trade

Agreements

Following on the European Council’s initiative from Essen, the Commission

negotiated the EMIFCA, which was signed in Madrid on the 15 December 1995 by the

Spanish President of Council and the representatives of MERCOSUR.34

This event coincided

with the launching of MERCOSUR’s (incomplete) customs union which started operating on

the 1st January 1995. The EMIFCA was to be the official start of trade negotiations towards

an Interregional Association Agreement (IAA). If this is signed, it would lead to the formation

of the “biggest free trade area in the world and the first free trade agreement between two

customs unions” (Doctor 2007: 282). The IAA is based on a three-pillar structure: 1). Chapter

on Political Dialogue, 2). Chapter on Trade and Economic Issues and 3). Chapter on

Cooperation. In 2000, negotiations were opened by both parties and since then the EU and

MERCOSUR, who aim “to become close companions in a strategic inter-regional

partnership”35

have reached consensus on the first and third pillars, but regarding the second

pillar several outstanding issues still need to be resolved in order to come to successful

conclusion of the agreement.36

The EU-MERCOSUR interregional relations can be divided into four phases (Faust 2004: 46;

Doctor 2007: 283):

1. intra-EU bargaining for IAA negotiating mandate (1995-1999)

2. official launch of IAA negotiations (1999-2001)

3. substantive region-to-region bargaining (2001-2004)

4. stalemate / efforts to continue conclusion of IAA (2004-)

The main forum where negotiations took place was the Bi-Regional Negotiations

Committee (BNC) which was complemented by other institutional mechanisms, such as the

Sub-Committee on Cooperation (SCC) which was divided into three sub-groups; Subgroup on

Economic Cooperation; Subgroup on Social and Cultural Cooperation; and the Subgroup on

Financial and Technical Cooperation. Also three technical groups on trade issues were

34

Although the EMIFCA was signed towards the end of 1995, it has not yet come into force because, as a so-

called mixed agreement, the part which goes beyond trade policies requires ratification by both European

Parliament and each of the member states’ national parliaments. 35

Mercosur-European Community Regional Strategy Paper 2002-2006, p. 3, Original emphasis.

http://ec.europa.eu/external_relations/mercosur/rsp/02_06_en.pdf (18.July 2009). 36

EU started negotiations with 15 members and as of May 2004 negotiations involved 25 member states.



22

created. These technical groups were; the Group for Trade in Goods and Tariffs; the Group

for Services and Intellectual Property Rights; and the Group for Competition and Regulated

Markets. For a detailed analysis on the institutional structure see Figure 4 ‘Institutional

Arrangements for EU-MERCOSUR Bi-Regional Negotiations’. Since negotiating

methodology was on the principle of ‘single undertaking’ (nothing is agreed until all is

agreed), an eventual IAA requires progress on all negotiating fronts. Nevertheless, the

unofficial set deadlines for concluding the trade negotiations were the Second EU-Latin

American Summit in May 2004 in Mexico and the 2004 EU Enlargement. These deadlines

passed and when also the official deadline of 31 October 2004, the end of term of the serving

Commission passed, the IAA was officially in stalemate.

It is of importance to note that EU-Chile negotiations “were initially undertaken in the

context of Mercosur under the assumption that Chile would join Mercosur” (Garcia 2009b:

151) and as such these negotiations were dealt with as one ‘negotiation package’ where a

similar trade agreement had to be reached with Chile also. Thus, EU-MERCOSUR and EU-

Chile trade negotiations were dealt with simultaneously and thus were ‘shadowing’ each

other. Only when it became evident that Chile was not to join MERCOSUR as a full member,

the EU decided to undertake individual EU-Chile negotiations. These separate negotiations

commenced with the fifth round of EU-Chile negotiations. Possibly, due to the original plan

of Chile joining MERCOSUR, the institutional negotiation structure looks rather similar to

that of the EU-MERCOSUR bi-regional negotiations. For a detailed analysis of the

institutional structure of the EU-Chile negotiations see Figure 5 ‘Institutional Arrangements

of the EU-Chile Negotiations’.

Chile declined full membership of MERCOSUR due to its lower tariff structure, open

economy and its liberal trade policy which is incompatible with MERCOSUR’s protectionist

trade policy. In 1994, Chile had a uniform tariff of 11 percent which decreased to 8 percent in

2001 and to 6 percent in 2003. EU-Chile cooperation has gone through several bilateral

agreements before the AA was signed. The first Cooperation Framework Agreement was

signed in 1990 which was replaced by the Cooperation Framework Agreement of 1996. This

aimed to deepen economic, political and cooperative relations between EU and Chile,

including the liberalisation of bilateral trade. Negotiations commenced in April 2000, was

signed on 18 November 2002 and entered into force on 1st March 2005 (see Fig. 2

‘Chronology of EU-Chile Negotiations’).



23

In the case of the EU-Mexico trade agreement, as above mentioned, the EU was seeking

NAFTA-parity. EU-Mexico originally signed a first-generation Co-operation Framework

Agreement in 1975 which was then replaced by the 1991 Co-operation Framework

Agreement.37

On 8 December 1997, the Economic Partnership, Political Coordination and

Co-operation Agreement, the Interim Agreement and Joint Declaration were signed. 38

For a

detailed analysis on EU-Mexico trade negotiations see Figure 3 ‘Chronology of EU-Mexico

Negotiations’. The Interim Agreement and Joint Declaration allowed start of negotiations

under both Community and Member State competence without awaiting approval of Global

Agreement; possibly, due to discrimination of European products in the Mexican market

caused by NAFTA, the EU wanted to conclude a trade agreement with Mexico urgently.

Although, the institutional structure of the EU-Mexico trade negotiations looks similar to

those of EU-MERCOSUR and EU-Chile, there is however a slight difference. The EU-

Mexico Joint Council and Joint Committee were established within framework of the

Economic Partnership, Political Coordination and Co-operation Agreement; however only

one negotiation team was to “deal with all the matters being discussed [and] technical experts

from both sides will work on formulating recommendations to the negotiation group”.39

This

negotiation group is the so-called ‘Joint Committee for Negotiations’ group. The first actual

meeting of the Joint Council was not until after the trade negotiations had been successfully

concluded (27 February 2001). For more on the ‘Institutional Arrangements for the EU-

Mexico Negotiations see Figure 6.

3.1 Level III: National Level – Economic Interests

EU-MERCOSUR

Putnam argues that “[t]he size of the win-set depends on the distribution of power,

preferences and possible coalitions among (…) constituents” (Putnam 1988: 442). An analysis

of economic interests, whether class (business and labour) or sector (services and agriculture),

demonstrates the role played by these actors in either supporting or obstructing trade

negotiations. Especially at the beginning of trade negotiations, business was one of the most

dynamic economic interest groups which also suffered under high diffusion of interests. In

37

For more information on first, second and third (mixed) generation Association Agreements see Bretherton

and Vogler 2006 Chapter 3. 38

Also referred to as the “Global Agreement” which after signing was awaiting approval of both the European

Parliament (EP) and the Mexican Senate. 39

http://www.sice.oas.org/TPD/MEX_EU/Negotiations/OpeningNegs_e.pdf



24

1999, it organised the MERCOSUR-European Union Business Forum (MEBF) with the goal

to overcome collective action problems. This however was not as successful as persistent

heterogeneous interests contributed to a lacking of coherence of the forum. Regarding

agriculture, MERCOSUR’s “demand for trade liberalization in agriculture is one of its main

priorities in the […] negotiations with the EU” (IRELA 1999: 11). This has reduced the win-

sets of the most protectionist countries of the EU, such as Ireland, Italy, Spain, Portugal and

France (Woolcock 2005: 390) that want to maintain trade barriers to guard sensitive sectors,

within the framework of the Common Agricultural Policy.40

Moreover, interest groups

(especially farmers’ organisations), “supported by the French government and some other

member states, have argued against further concessions” (Woolcock 2005: 392). “They also

obstructed progress in negotiation wherever possible [and] have successfully delayed the

signing of any agreement that would give MERCOSUR freer access to the European Market”

(Doctor 2007: 295).

The EU, for its part, has pushed for access to MERCOSUR’s markets regarding

investments, industrial products and government procurement. This pressure particularly

increased after the failure of the WTO Cancun ministerial conference, when the Singapore

Issues were set aside from the agenda.41

The EU’s eagerness to sign the IAA has fluctuated

over time for various reasons. Stagnation of multilateral trade talks increased EU’s

involvement in Mercosur interregional trade talks. Also, periods of perceived US influence in

Latin America were catalysing periods of EU interest within the region. Various significant

international factors contributed to EU fluctuations of interest in MERCOSUR. “From the

EU’s perspective, the emerging markets financial crises of 1997–98 suddenly altered EU

opinion of MERCOSUR, which dropped from being seen as a dynamic region with abundant

opportunities for European trade and investment to a much less attractive region (this view

was subsequently reinforced with the collapse of the Argentine economy in late 2001)”

(Doctor 2007: 290). In addition, the 2004 and 2007 EU enlargements determined the need for

the EU to focus on the ‘near abroad’ instead of the defining an IAA.

WTO Compatibility

40

Some EU member states, UK, Netherlands, Denmark and Sweden, have taken a more liberal position. 41

Singapore Issues (Singapore Ministerial Declaration 1996) include investment, competition policy,

transparency in government procurement and trade facilitation.



25

The General Agreement on Tariffs and Trade (GATT) Article XXIV (8b), states that

“substantially all trade” is to be liberalised in case an agreement between customs territories is

to be identified as a free trade area. This has led to the EU (and the WTO) to interpret that any

FTA is to cover at least 90 percent of all trade between the parties involved, with no major

sector excluded during a transitional period of no more than 10 years. This multilateral

condition accounts for liberalisation of trade in agriculture, for the first time, in the Mexico

and Chile FTAs.42

This means that also (some) sensitive agricultural products from the

negative list would have to be included in the EU-MERCOSUR FTA.43

MERCOSUR member states have a comparative advantage in agricultural production

as they are main exporters of agricultural products to the EU. Thus, as most competitive

agricultural exports face substantial barriers of entry, market access for these products is of

great significance. In order to support EU producers, MERCOSUR’s agricultural exports are

faced with, among others, high tariffs, restrictive tariff rate quotas (TRQs), minimum entry

prices, special safeguards and sanitary measures. For MERCOSUR, a successful FTA

between these two regions would have to include ambitious EU commitments in agriculture

with a high level of market access for MERCOSUR products to the European market.

Concerning the EU, the main objectives in the FTA negotiations were better access for

industrial products (especially automotives), services (telecommunications) and access to

government procurement.

MERCOSUR’s protectionist tendencies have also prevailed towards the European

Union. “The prize for an agreement – greater access to EU agricultural markets, valued by

Argentina, Uruguay and the strong Brazilian agro-business lobby group44

would carry the

price of providing greater access to MERCOSUR industrial and service sectors for European

competitors, thus creating pressure on Brazilian companies” (Klom 2003: 367). Thus, the

Brazilian agro-business lobby would push for the conclusion of the IAA, but on the other

hand, pressure is put on Brazilian companies. “In MERCOSUR the common market is mainly

based on Brazil [and as such] Brazilian domestic policies are the real drivers behind the pace

of MERCOSUR progress” (Klom 2003: 355). Brazil carries a big responsibility in the region;

hence, its chief negotiators face a real challenge in having to reconcile these two domestic

42

Also, the 1999 EU-South Africa FTA included liberalisation of trade in agriculture. 43

EU tariff peaks are in major MERCOSUR export products such as beef, sugar, cereals and milk products. 44

This would increase the win-set of Argentina, Uruguay and the Brazilian agro-business lobby group.



26

interests with international imperatives from the EU in order to maximize the chances of

ratification.

Concerning the EU-Mexico and EU-Chile FTAs, these are characterised by the

assumption of a general liberalisation within a predetermined period of time. Also, the main

sensitive agricultural products from both the EU and its trading partners were excluded (see

Table 2).45

For most agricultural products, tariff elimination is not achieved immediately but

according to tariff reduction schedules (of no longer than 10 years). Each agreement includes

a set of schedules with different starting dates for the elimination process and with different

phase-out periods. Detailed annexes assign individual products to the different tariff reduction

schedules and respectively to the exemptions.46

Concluding an FTA with Chile was “always promised to be easier partly because, as a

single country, there were fewer bureaucratic difficulties, as a smaller country with a

less developed industrial base and a non-traditional agricultural profile, trade issues

were on the whole less conflictual, though not without their difficulties over wine in

particular, and, as an established open economy, conflicts over the role of the market

and international investment were inevitably less politically charged. As a result, the

negotiations were easier” (Grugel 2002: 10).

EU-Chile

Undoubtedly important for the rapid conclusion of trade negotiations were the

confined ambitions of (both Mexico and) Chile with respect to market access for agricultural

goods and the delicate ‘knot’ of EU agricultural protection. The EU has one of the biggest

markets of the world and enjoys enormous bargaining power which has led to the

consequence that the EU has not been challenged by these bilateral partners. Commencing

EU-Chile trade negotiations, Chile’s agricultural sector contributed a relatively minor

proportion of 11 per cent to the country’s GDP. Main agricultural products are cereals,

fodder, sugar beets, potatoes and vegetables. Due to the reversed growing season, fruits have

become a particularly important product exported to the EU and also wine has also gained

increased status as a key export product. The Association Agreement defines a transition

period for tariff reduction of ten years for trade liberalisation of agricultural commodities and

45

EU’s sensitive agricultural products with high domestic protection are bovine animals and beef, domestic

swine, poultry, diary, cereals, sugar, some (season-dependent) fruits and vegetables, citrus grapes and grapes,

olive oil, flowers and rice. 46

EU-Chile FTA includes 17 Annexes. http://trade.ec.europa.eu/doclib/docs/2004/november/tradoc_111621.pdf



27

processed agricultural products.47

Regarding tariff concessions, there are four tariff

elimination schedules in which the EU completely eliminates duties with transitional periods

of zero, four, seven and ten years. In addition, duties are partially liberalised in four other

product schemes (Art. 71). On the Chilean side, liberalisation takes place in three schedules of

zero, five and ten years, in which tariffs for the respective products are phased out completely.

Besides tariff rate quatos (TRQs),48

Chile has not committed to any further partial

liberalisation schedules (Art. 72). As in the Global Agreement, products whose denomination

is protected within the EU are excluded from trade liberalisation. This is especially valid for

cheese and wine (Art. 71). Table 2 lists other main products that are excluded from

liberalisation including main TRQs for products excluded from liberalisation. Options for

flexible adjustments are integrated by means of a review clause (evolution clause) thereby

providing opportunities to further enhance liberalisation three years after the implementation

of the agreement. “On the European side, [societal actors’] resistance was mobilised around

the issue of agriculture in the allied process of negotiations with Mercosur, meaning that most

interests groups did not even have a specific opinion regarding negotiations with Chile”

(Garcia 2009a: 16). Regarding trade in services, due to Chile’s liberal trade policy and

internationalisation strategy, this country was open to liberalise trade in services, trade in

investments etc. Thus, the Chilean business community was very much in favour of

establishing an FTA between the EU and Chile.

One issue of contention between the EU and Chile was that the Chilean export sector

in wine and spirits strongly competed with EU production. This delicate issue however was

successfully resolved when Chile complied to give up the specific ‘reserva’ and ‘chateau’

descriptions from its wines, and sell them as to the EU as ‘New World wines’ (2002: 15). The

EU consequently offered Chilean wine and spirits tariff free market access for a transitional

period of four years. Thus, the EU-Chile AA includes a separate agreement on wines and

spirits (Annex V and VI). Another issue of contention was EU’s access to Chilean fisheries

supply. However, with high expectations to successfully accomplish the EU-Chile AA, “the

EU gave up on gaining greater access to Chile’s sea resources” (Garcia 2009a: 24).

47

EU-Chile Assosiation Agreement

http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32002D0979:EN:NOT 48

Tariff rate quotas (TRQs) are certain defined quantities that are subject to lower tariffs or no tariffs which can

be established in addition to tariff reduction to achieve minimum market access.



28

EU-Mexico

Starting EU-Mexico trade negotiations, Mexico’s agricultural sector was characterised

by a low share of 4 per cent GDP. Agricultural trade was not a major issue in trade between

the EU and Mexico as the main Mexican products exported to the EU are coffee, vegetables

and spirits. The major imports from the EU are oilseeds, dairy products and wine. The Global

Agreement also sets out a transition period for tariff reduction of ten years for the

implementation of all liberalisation commitments.49

For products subject to tariff

concessions, eight different partial and complete liberalisation schemes are established for

both the EU and Mexico (Art. 8 and 9). The longest transitional periods for the EU and

Mexico, in schedules which foresee complete liberalisation, are nine and ten years,

respectively. Sensitive products with EU protection are excluded from trade liberalisation.

This pertains especially to cheese and wine (Art. 8, 10). See Table 2 listing the main products

that are excluded from liberalisation and for some excluded Mexican products of which the

EU grants preferential market access within the limits of TRQs, whereas Mexico does not

reciprocate. Again, flexible adjustments are to be made by the EU-Chile Joint Council

through a review clause (Art. 10) which provides further liberalisation of agricultural trade

after three years of the AA’s enforcement. An additional Wine and Spirits Agreement

commits Mexico to protect all EU designations and the EU reciprocates by its commitment to

protect Mezcal and Tequila.

Summary Level III – National Level: Economic Interests

The analysis of these three EU FTAs shows that the EU but also its counterpart

excludes important sensitive agricultural products or retain tariff barriers concerning market

access. EU domestic protection and support pattern for specific agricultural products can be

identified as a key factor determining these exceptions. For those products that are excluded

from liberalisation, the EU does however grant concessions by admitting market access

within the limits of TRQs. This concludes that trade in agricultural products is far from being

completely liberalised mainly due to the fact that trade in agricultural of EU FTAs competes

on the one hand with the conflict of trade liberalisation and on the other hand with national

interests to limit market access.

49

EU-Mexico Economic Partnership, Political Coordination and Cooperation Agreement

http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:22000A1028(01):EN:NOT



29

3.2 Level II EU-Level / MERCOSUR-Level

Putnam argues that “[t]he size of the win-set depends on (…) political institutions”

(Putnam 1988: 448). In this case, on the European side, the nature and content of the IAA is

determined by the shared competence between the Commission and the member states to

negotiate with MERCOSUR at the international level (Level I).50

The conclusion of the IAA,

which the Commission negotiates on behalf of the EU, would thus take place when the

Council of Ministers approves it by unanimity at the EU level (Level II), after having

obtained the assent of the European Parliament. Ratification of the IAA would occur after all

member states’ parliaments have achieved agreement at the domestic level (Level III). Thus,

the decision-making procedure within the EU itself – especially the need for unanimity in the

Council, and the requirement for the European Parliament’s assent – complicates the picture a

great deal and the risk of political fragmentation reduces the win-set.

Intra-EU Level

On 22 July 1998, requesting a negotiation mandate from the Council was hampered by

dissimilarities faced within the European Commission. The decision was not adopted

unanimously due to four, out of 20 Commissioners’51

controversial opinions. Two

Commissioners against the negotiation mandate were the Commission President Jacques

Santer (Luxembourg) and the Commissioner for Agriculture, Rural Development and

Fisheries Franz Fischler (Austria) who put forward a study which summarised negative

effects of an EU-MERCOSUR FTA towards the agriculture sector. On the other hand,

Manual Marín, the Commission’s Vice President (Spain) was in favour due to the favourable

effects of an FTA regarding the services, and especially, automobile sector. However, of

MERCOSUR’s imports “only 16 per cent [of agricultural products] could be classified as

sensitive. Even if a quota or other protectionist action were to be introduced for these

products, a free-trade zone would conform to WTO norms, because over 90 per cent of all

products would still circulate freely” (Müller-Brandeck-Bocquet 2000: 570). Hence, the

(offensive and defensive) interests of the European Commission are clearly visible with,

although some not convinced most votes in favour of the negotiation mandate. Another

hindrance contributing to the slow progress of a negotiation mandate was Commissioner Leon

Brittan’s (UK) interest in strengthening links with the US through the ‘New Transatlantic

50

Article 300 and Article 310, Treaty establishing the European Community. 51

More on this see http://ec.europa.eu/archives/1995_99/commissioners/index_en.htm



30

Marketplace’ (NTM) project which was highly opposed and “effectively vetoed by France

and removed from the agenda of a bilateral US-EU summit in May 1998” (Pollack and

Schaffer 2001: 53). Thus, the Commission presented a negotiation mandate to the Council at

the end of July 1998, but it was not until September 1999 until the European Council

delivered the official mandate to the European Commission due to contrary interests within

the European Council. It was agreed upon however, that negotiations on trade tariffs and

quotas were not to commence until April 2001. The ‘compromise’ mandate52

was presented at

the first ever EU-Latin American summit, the Rio Summit of 28 June 1999 which declared a

strategic partnership of the two regions. “It was clear from the very beginning that the

implementation of (…) this declaration would require (…) political will” (Westphal 2005:

154). On 13 September 1999, the Council of Ministers officially approved the negotiation

mandate.

Intra-MERCOSUR Level

Things are no easier in the Southern Cone, where the ratification procedures have also

influenced the size of the win-set. MERCOSUR is built on weak foundations of integration.

The lack of a supranational coordinating power hinders the establishment of a common

position among the chief negotiators, and there is no certainty, even if the IAA is signed at the

international level, that it would then be ratified by the national parliaments at Level III.

Therefore, the pro-tempore Presidency of the Council of the Common Market has to keep

each government informed of the evolution of the negotiations of the IAA in order for them to

discuss this with their respective national parliaments to assure that the outcome lies within

the win-sets. For Brazil’s ‘dualist’ legal approach, which requires translation of international

law into national law, ratification of the IAA would not be a problem. But for Argentina,

which is inclined towards ‘monism’, where ratification of international law immediately

incorporates it into national law, Level III does present a challenge for its chief negotiators.

The setting of the MERCOSUR-institutions implies that the process of integration is

burdened to an excessive degree with the need to achieve consensus among the involved

governments. Thus, the functioning and continued development of MERCOSUR rests entirely

52

Conditions for adopting the mandate were that the negotiations had to be linked to the negotiations within the

WTO and a two-phased negotiation, a non-tariff phase which started immediately and tariff phase which were to

commence only after 1 July 2001, and should only be finished awaiting the results of the DDR (Doha

Development Round).



31

in the hands of the executive organs, and depends on their willingness to integrate. To sum

up, the lack of any supranational institutions capable – as shown by the examples of the

European Commission and the European Parliament (EP) – to act as a motor of integration

throws a serious threat on the further evolution of the MERCOSUR. One basic but significant

problem of the negotiations concerns were regarding its name and main aim, a common

market of the south. MERCOSUR is far from reaching this goal and even referring to it as an

FTA seems optimistic as it leans more towards an “incomplete free trade area with some

degree of harmonization of member states’ extra-zone commercial policies” (Bouzas et al.

2002: 131). It has made little progress of merging separate customs territories into a single

one and to complete the free movements of imports within the territories.

A main difference between the EU and MERCOSUR is the intra-regional balance of

power. The power asymmetry within MERCOSUR is extreme due to the significant

predominance of Brazil in MERCOSUR population, production and territory. This situation is

highly unfavourable for policy harmonisation and as such weakens MERCOSUR’s political

consolidation. Regarding the size of Brazil within the region, it makes it difficult to outweigh

the benefits of regional decision-making over the costs of loss of national sovereignty over

domestic policy. Therefore, Brazil is highly in favour of the 100% intergovernmental

institutional structure of MERCOSUR. This power asymmetry also contributes to divergent

trade expectations of the biggest MERCOSUR member states: Brazil and Argentina. Unlike

the EU, where equally-minded member states such as Germany and France were the ‘motors’

of integration, Brazil and Argentina use MERCOSUR for different purposes. Brazil uses the

regional platform to maximise its political role as a global and regional leader, for example its

initiatives for advancing a permanent seat in the United Nations Security Council (UNSC), or

its resistance against increasing US leadership attempts through the creation of a Free Trade

Area of the Americas (FTAA). Argentina, on the other hand, seeks strategic alliances with the

US through amongst others, a special relationship with NATO and its support towards the

FTAA.

3.3 Level I International Level – Negotiation Strategies

Putnam argues that “[t]he size of the win-set depends on the strategies of the (…)

negotiators” (1988: 450). The European Commission is the sole negotiator and represents the



32

EU with ‘one single voice’. Thus, focus on the actual negotiations will investigate the

efficiency of this actor in the EU-Mexico, EU-MERCOSUR and EU-Chile trade negotiations.

First of all, an important difference in negotiating culture exists between the

MERCOSUR and EU teams. The Community teams are composed mainly by technical

experts, highly specialised in every specific sector involved in the process, with relevant

experience in intra-EU and multilateral negotiations; on the contrary, MERCOSUR team is

usually led by high-level officials and politicians, not always acquainted with the details of

the negotiation, and who often participate in the FTAA process as well. Therefore the usual

method used by MERCOSUR team to reach agreements is top-down: the negotiators reach a

sort of framework agreement, leaving it to technical experts to find a solution to troublesome

details later on. The EU.s approach is quite the opposite, building agreement bottom-up on the

basis of informal consensus on objectives (Klom 2003).

In the IAA case, the chief negotiators of both regions have lacked tact in manipulating

their strategies. An example of this was when “the EU presented a historic negotiating offer to

MERCOSUR in Montevideo53

, covering 90 per cent of agricultural trade and 100 per cent of

industrial trade” (Klom 2003: 363). As good as this offer seemed for the EU negotiators,

“MERCOSUR was not able (Argentina) or willing (Brazil) to reciprocate in presenting a

counter-offer” since its member states were faced with other important issues: “Argentina on

the verge of collapse, advocating bilateral free trade deals, and a Brazil bent on maintaining

parallelism between EU and FTAA processes” (Klom 2003: 363). Therefore, the EU lost a

good opportunity for widening MERCOSUR’s win-sets due to poor strategic management.

It is relevant to highlight at this point that some may argue that MERCOSUR’s

negotiators have more autonomy than the EU Commission’s representatives in the IAA

negotiation process since they lack a legal instrument such as the EU negotiating mandate,

given to the Commission by the Council of Ministers according to Article 133. However, it

should not be misunderstood the concept of autonomy in the context of the Southern Cone

since MERCOSUR negotiators (who are led by the Ministries of Foreign Affairs) also have to

conduct extensive internal coordination within governmental bodies, the private sector, civil

society and national Congresses, from where they derive their national positions, which are

later coordinated with other MERCOSUR member countries’ negotiators. This means that in

formal terms, a MERCOSUR negotiator could have less strict supervision deriving from a

53

Fifth negotiation round, see chronology of EU-Mercosur Bi-Regional Negotiations.



33

written mandate, but nonetheless they must still handle a great degree of scrutiny from

society, economic sectors and governmental bodies at large.

With MERCOSUR’s main interest in agriculture, their negotiators specific concerns

were EU’s export subsidies and domestic support mechanisms. Thus, of great interest were

EU commitments leading to less trade distortions for MERCOSUR’s exports and

compensations for trade distortions resulting from EU domestic subsidies. The position

MERCOSUR took was one of elimination of export subsidies as soon as the EU-

MERCOSUR FTA comes into force. Conversely, the EU was only interested in addressing

the issue of subsidies in multilateral negotiations. During the fifth trade negotiation roundin

July 2001, the EU proposed its first offer, gradual liberalisation of its market for

MERCOSUR goods over a time frame of ten years, covering 100 percent of manufactured

goods and 90 percent of agricultural products, however excluding tariff cuts for

MERCOSUR’s main exports. 54

MERCOSUR’s counter proposal, during the sixth trade

negotiation round in October 2001, excluded the automobile industry from its proposal to

liberalise 86 per cent of their market for EU manufactured goods. Clearly these proposals

were not acceptable for both sides. Ten negotiation rounds later, on the 29th

September 2004,

the final offer of the EU proposed to gradually open markets for MERCOSUR’s exports of

industrial and agricultural goods, to open its services market, to allow access to the public

procurement market and to implement non-discriminatory rules for MERCOSUR investors in

Europe.55

However, MERCOSUR’S main agricultural export products (sugar and meat) were

placed in category E, which meant ‘no clear tariff reduction period defined’. The EU also did

not extend previously offered quotas on farm products, which meant in numerical terms “[i]n

the case of beef, for example, Brazil would be given an export quota of 2,400 tons for the first

year, which is a mere fraction of the 95,000 tons it now sells annually to the European market,

with tariffs of up to 176 percent”.56

Conversely, “European governments view the concessions [with the respect for EU

origin denominations in the investment sector, government procurement and services] made

by Mercosur as insufficient”.57

Unsatisfied, the two sides accused each other for letting the

54

See chronology of EU-MERCOSUR Bi-Regional Negotiations. 55

http://trade.ec.europa.eu/doclib/docs/2004/september/tradoc_119163.pdf 56

Deadline for Mercosur-EU talks jeopardised (4th

October 2004).

http://www.bilaterals.org/article.php3?id_article=781&lang=en (Access 6 August 2009). 57

Deadline for Mercosur-EU talks jeopardised (4th

October 2004).

http://www.bilaterals.org/article.php3?id_article=781&lang=en (Access 6 August 2009).



34

negotiation rounds fail due to a strong political will lacking on both sides to face short term

losses and internal debates both within the two blocs and within member countries

International Environment

The EU-MERCOSUR trade negotiations have to be interlinked with the negotiations

of the Doha Development Round (DDR) The EU has been apprehensive to make scheduled

commitments in agriculture outside the framework of the WTO because any concessions-

making with MERCOSUR could weaken its position in the DDR. However, it thereby

endangered a serious chance for successfully concluding the EU-MERCOSUR FTA. Also,

MERCOSUR was reluctant to make any specific concession commitments, especially

regarding the automotive sector, in case it was to hold these promises also in the FTAA

negotiations. Thus, parallel negotiations on several trade platforms, which were originally

used by both the EU and MERCOSUR to create bargaining leverage, were later perceived as

major obstacles in concluding the FTA. Similar problems faced within the DDR and the

FTAA trade negotiations, which were also of great significance for failure of the EU-

MERCOSUR FTA, were developed countries seek expanded trade in services and increased

intellectual property rights, while less developed nations seek an end to agricultural subsidies

and free trade in agricultural goods.58

58

Singapore Issues (Singapore Ministerial Declaration 1996) include trade and foreign investment, trade and

competition policy, transparency in government procurement and trade facilitation. These were, until the failed

negotiations of Cancun, on EU’s persistence a main issue on the Doha Development Agenda (DDA).



35

Figure 1. Chronology of the EU-MERCOSUR Trade Negotiations: Meetings of the Joint

Council for Negotiations and the Bi-Regional Negotiations Committee (BNC) Event /

Negotiation Round

Date Place Key Issues

Signing of

EMIFCA

15 Dec. 1995 Madrid Framework agreement for an IAA including

political dialogue, cooperation and trade

European Comm.

receives mandate

from Council

13 Sept. 1999

EU-Mercosur Joint

Council Meeting

23 Feb. 2000 Vilamoura

1. Round of BNC 6-7Apr. 2000 Buenos Aires Three-pillar Structure: Political Dialogue,

Trade & Cooperation

2. 13-16 Jun.

2000

Brussels Identification of Obstacles and Objectives

3. 7-10 Nov.

2000

Brasilia Exchange of Technical Data

4. 19-22 Mar.

2001

Brussels Cooperation and Non-Tariff Trade Issues

5 Negotiations on

all tariff matters

commence

2-6 Jul. 2001 Montevideo EU first liberalisation offer.

Separation of EU-MERCOSUR and EU-Chile

negotiations.

6. 29-31 Oct.

2001

Brussels MERCOSUR counter liberalisation offer

7. 8-11Apr.

2002

Buenos Aires Agreement of Political & Cooperation

Chapters, Trade Facilitation Measures Package

EU-Mercosur Joint

Council Meeting

Jul. 2002 Rio de Janeiro Adoption of work-programme for trade

negotiations

8.

11-14 Nov.

2002

Brasilia Trade & Investment Rules

9. 17-23 Mar.

2003

Brussels Substantive Tariff Offers, Government

Procurement & Investment

EU-Mercosur Joint

Council Meeting

27-28 Mar.

2003

Athens Political assessment of trade negotiations

Political dialogue on regional/international

situation

10. 23-27 Jun.

2003

Asunción Government Procurement, Investment &

Services

EU-Mercosur Joint

Council Meeting

12 Nov. 2003 Brussels Roadmap final phase of free trade negotiations

11. 2-5 Dec. 2003 Brussels Agriculture Modalities

12. 8-12 Mar.

2004

Buenos Aires Competition, Customs & Tariffs

13. 3-7 May 2004 Brussels Exchange views on Tariff Offers

14. Jun. 2004 Buenos Aires General review of Asymmetrical Treatment,

Discussion of Draft of Text of IAA.

15. Jul. 2004 Brussels Pursuing negotiations

16. Last round of

BNC

24 Sep.

29 Sept. 2004

MERCOSUR offer

EU offer

EU-Mercosur Joint

Council Meeting

20 Oct. 2004 Lisbon Discussion of latest development

Agreement on time of reflection59

Source: European Commission http://ec.europa.eu/trade/issues/bilateral/regions/mercosur/index_en.htm

Foreign Trade Information System/ Organization of American States

http://www.sice.oas.org/TPD/MER_EU/MER_EU_e.asp

59

Since 2004, EU-Mercosur Joint Council Meetings have been held (Luxembourg 2005, Brussels 2005, Vienna

2006, Lima 2008, and Prague 2009) but so far no results have been achieved. Until 2008, 16 rounds of

negotiations have taken place whereas since 2004 these negotiations have only taken place on a technical level

due to the connection of EU-MERCOSUR negotiations with these of the Doha Development Round (DDR). See

http://ec.europa.eu/trade/issues/bilateral/regions/mercosur/index_en.htm (18.July 2009).



36

Figure 2. Chronology of EU-Chile Trade Negotiations

Event /

Negotiation Round

Date Place Issues

Signing of Co-

operation

Framework

Agreement60

21 Jun. 1996 Florence Framework to deepen economic, political and

cooperative relations, including the

liberalization of bilateral trade.

Entry into force of

Cooperation

Framework

Agreement

25 Jan. 1999 Brussels To foster the bilateral relationship; through;

promotion of the political dialogue;

reinforcement of bilateral cooperation; and

liberalization of trade and services.

First Meeting of

EU- Chile Joint

Council

24 Nov. 1999 Brussels Proposal regarding definition of structure,

methodology and calendar of negotiations

Official launch of trade negotiations

1. Round

Negotiation Comm.

10-12 Apr.

2000

Santiago de Chile Three-pillar Structure: Political Dialogue,

Trade & Cooperation

2. 20-23 Jun.

2000

Brussels Identification of obstacles and objectives

3. 13-16 Nov.

2000

Santiago de Chile Agreement in areas political dialogue and

cooperation.

4. 12-15 Mar.

2001

Brussels Draft text on institutional arrangement of AA.

5. Negotiation on

all tariff matters

commence

9-12 Jul. 2001 Brussels EU and Chile liberalisation offer61

Separation of EU-MERCOSUR and EU-Chile

negotiations.

6. 1-4 Oct. 2001 Brussels Fisheries and sea resources

7. 10-14 Dec.

2001

Santiago de Chile Anti-terrorism clause (Political Dialogue

Chapter)

8. 28 Jan-1 Feb

2002

Brussels Wines and Spirits

9. 4-8 Mar. 2002 Santiago de Chile General review of Asymmetrical Treatment,

Discussion of Draft of Text of IAA.

10. Final Round

Negotiation Comm.

15-26 Apr.

2002

Brussels Signing of Wines and Spirits Agreement

EU-Chile AA

initialled

10 Jun. 2002 Brussels

EU-Chile AA

signed

18 Nov. 2002 Brussels

EU-Chile AA entry

into force

1 Feb. 2003

EU Parliament

approves EU-Chile

AA.

12 Feb. 2003

European Council

concludes AA.

28 Feb. 2005

Entry into force of

full AA.

1 Mar. 2005

Source: European Commission http://ec.europa.eu/trade/issues/bilateral/countries/chile/index_en.htm

DIRECON http://www.direcon.cl/index.php?accion=ue

Foreign Trade Information System/ Organization of American States

http://www.sice.oas.org/TPD/CHL_EU/CHL_EU_e.ASP

60

EU-Chile originally signed the Co-Operation Framework Agreement in 1990 (entry into force 1991) which

was then replaced in 1996. 61

EU’s liberalisation offer to Chile was identical to EU’s offer to MERCOSUR “with some slight differences in

the volumes of trade and in some specific products, in order to adapt the proposals to each economy” Garcia

2009:161.



37

Figure 3. Chronology of the EU-Mexico Trade Negotiations

Event /

Negotiation Round

Date Place Issues

Solemn Joint

Declaration

(The Paris

Declaration)

2 May 1995 Paris

(Paris

Declaration)

To deepen economic, political dialogue and

cooperative relations, including the

liberalization of bilateral trade.

Signing of

Economic

Partnership, Political

Coordination and

Co-operation Agreement, Interim

Agreement and Joint

Declaration.

8 December

1997

Brussels

Signing of the three instruments foster the

bilateral relationship on a legal basis through;

promotion of the political dialogue;

reinforcement of bilateral cooperation; and

liberalization of trade and services.

Interim Agreement and Joint Declaration

allowed start of negotiations under both

Community and Member State competence

without awaiting approval of Global

Agreement

Mexican Senate

approves Interim

Agreement

23 April 1998

EU Parliament

approves Interim

Agreement

13 May 1998 Once Interim Agreement was approved by

both parties EUMFTA negotiations were

launched

1. Round of

Negotiation Comm.

9 November

1998

Mexico City Negotiations on trade and trade-related matters

2. 18 January

1999

Brussels Exchanging of draft proposals and views on

public procurement, intellectual property

rights and competition.

3. Tariff exemptions

Rules of Origin

4. 14 April 1999 EU liberalisation proposal

NAFTA parity for duty-free trade industrial

goods

Mexican refusal to make concessions

EU threat to stop negotiations

5. 17 May 1999 New Mexican proposal62

EU Parliament

approves Global

Agreement

6 May 1999 Approval of trade rules in Community

competence

6. Market Access, Rules of Origin, Services

7. Case-by-case negotiations Rules of Origin

8. Case-by-case negotiations Rules of Origin

9.Final Round of

Negotiation Comm.

24 November

1999

Brussels

Mexican Senate

approves Global

Agreement

20 May 2000

Signing of Global

Agreement

23 March

2000

Lisbon

Declaration

Adopting results of negotiation in goods by

EU-Mexico Joint Committee

62

“In line with its negotiating mandate, the European Commission’s main aim was to liberalize access for its

industrial exports to Mexico by the same year as the United States and Canada (2003). The EU initially proposed

to liberalize industrial trade, which accounts for some 93% of total bilateral trade in goods, in two stages: 82%

immediately and the remaining 18% in 2003. Mexico responded by proposing a much longer timetable:

immediately liberalizing 42.5% of EU industrial exports to Mexico, with a further 6% being liberalized in 2003

and the remainder in several stages until 2009. (…) Mexico tabled a fresh proposal and offered to liberalize of

about 60% of EU industrial exports by 2003 and the rest in stages until 2007. Tariffs on European goods not

liberalised before 2003 would also be significantly reduced”. See IRELA 2000.



38

15 national

parliaments

approve Global

Agreement

February

2001

Approval of trade rules under Member State

competence

Entry into force of

EUMFTA

Entry into force of

political dialogue

and cooperation

1 July 2000

1 March 2001

Trade rules under Community competence

Trade rules under Member State competence

(trade in services, investment and intellectual

property rights) and political dialogue and

cooperation chapters

EU-Mexico Joint

Council (ministerial

meeting)

21 February

2001

Brussels Adopting results of negotiations in services,

capital movements and payments and

intellectual property

Source: European Commission http://ec.europa.eu/trade/issues/bilateral/countries/mexico/index_en.htm

Mexican Ministry of the Economy http://www.economia.gob.mx/?NLanguage=en&P=5200_5208_1



39

Figure 4. Institutional Arrangements for EU-MERCOSUR Bi-Regional Negotiations

Joint Council for Negotiations (Ministerial Meeting) (Heads of State & Government of EU Members, MERCOSUR, President of EU Council,

President of Commission)

Bi-Regional Negotiations Committee (Representatives of MERCOSUR, Commission, EU Council & EU Member States: High level

officials)

Subcommittee for Cooperation (Officials of MERCOSUR & Commission, assisted by EU member states representatives in

Article 133 Committee)

Subgroup for Economic

Cooperation

Subgroup for Social and

Cultural Cooperation

Subgroup for Financial and

Technical Cooperation

Industrial cooperation

Cooperation on technical

regulations and

conformity assessment

Cooperation in the field of

services

Investment promotion

Macro-economic dialogue

Scientific and

technological cooperation

Energy cooperation

Transports

Telecommunications,

information technology

and information society

Cooperation on

agricultural and rural

sector

Fisheries

Customs cooperation

Statistic cooperation

Environmental

cooperation

Consumer protection

Data protection

Social cooperation

Education and training

Social dialogue

Drugs and related organised

crime

Cultural cooperation

Public administration

modernisation

Inter-institutional cooperation

Cooperation on regional

integration

Technical Group 1

Trade in goods

Tariffs & non-tariff

barriers

Technical Group 2

Trade in services

Capital flows &

investments

Intellectual property

rights

Technical Group 3

Public procurement

Competition

Controversy resolution

Source: Based on Garcia 2009:156 and documents of Bi-Regional Negotiations Committee (European

Commission).



40

Figure 5. Institutional Arrangements for EU-Chile Negotiations

Joint Council for Negotiations (Ministerial Meeting) (Heads of State & Government of EU Members, Chile, President of EU Council, President of

Commission)

Joint Committee for Negotiations (Representatives of Chile, Commission, EU Council & EU Member States: High level

officials)

Subcommittee for Cooperation (Officials of Chile & Commission, assisted by EU member states representatives in Article 133

Committee)

Subgroup for Economic

Cooperation

Subgroup for Cooperation in

Social Affairs, Culture and

Education

Subgroup for Cooperation in

Science and Technology

Industrial cooperation

Cooperation in

technical regulations,

norms and standards

Cooperation in

services

Investment promotion

Macroeconomic

dialogue

Cooperation in energy

Transport

Cooperation in

agriculture and rural

sector

Fisheries

Customs cooperation

Cooperation in

statistics

Cooperation in

environmental issues

Consumer protection

Data protection

Social cooperation

Education

Social dialogue

Narcotics and organised

crime

Cultural cooperation

Scientific and technological

cooperation

Telecommunications, IT

and information society

Technical Group 1

Trade in goods


barriers

Technical Group 2

Trade in services

Capital flows &

investments


rights

Technical Group 3

Public procurement

Competition


Source: Garcia 2009b: 156.



41

Figure 6. Institutional Arrangements for EU-Mexico Negotiations

Joint Council for Negotiations (Ministerial Meeting) 63

(Heads of State & Government of EU Members, Mexico, President of EU Council, President

of Commission)

Joint Committee for Negotiations (Representatives of Mexico, Commission, EU Council & EU Member States: High level

officials)

Technical Group 1 Trade in goods


barriers

Technical Group 2 Trade in services

Capital flows &

investments


rights

Technical Group 3 Public procurement

Competition


Source: Based on http://www.sice.oas.org/TPD/MEX_EU/Negotiations/OpeningNegs_e.pdf

http://www.sice.oas.org/TPD/MEX_EU/Implementation/JointCouncil/meet1_e.pdf

63

EU-Mexico Joint Council (Art. 45) and Joint Committee (Art. 48) were established within framework of the

Economic Partnership, Political Coordination and Co-operation Agreement.

http://www.sice.oas.org/TPD/MEX_EU/Implementation/JointCouncil/DEC01_2000_e.pdf

The first EU-Mexico Joint Council meeting was on 27 February 2001.

http://www.sice.oas.org/TPD/MEX_EU/Implementation/JointCouncil/meet1_e.pdf



42

Table 2. Exclusion of sensitive agricultural products and acknowledged Tariff Rate Quotas

(TRQs) of the EU, Chile and Mexico Agreements

EU-Mexico FTA EU-Chile FTA

Main sensitive

agricultural

products excluded

from liberalised

import into the EU

Main sensitive

agricultural

products excluded

from liberalised

import into Mexico

Main sensitive

agricultural

products excluded

from liberalised

import into the EU

Main sensitive

agricultural

products excluded

from liberalised

import into Chile

bovine animals, beef,

swine, poultry/dairy

/eggs/honey/cut

flowers/some fruits

and vegetables (e.g.

olives for the

production of oil,

sweet corn,

asparagus, peas,

beans, apples, pears,

strawberries, grapes,

bananas)/cereals

except buckwheat/

sugar/some juices

(tomatoes, citrus

fruits, pineapple,

apple, pear)/

vermouth/ethyl

alcohol/vinegar

bovine animal, beef,

swine poultry/dairy

/eggs/potatoes/

bananas/cereals

except buckwheat/

roasted coffee/some

oil and fats (palm oil,

cobra oil, animal fats

or oil)/sugar/cocoa/

grape juice and grape

most/rum

beef, swine, sheep

and goats, poultry /

dairy/eggs/some

fruits and vegetables

(e.g.beans,

mushrooms of the

genus agaricus,

olives for the

production of oil,

sweet corn,

manjoc)/cereals and

the corresponding

products of the

milling industry /

sugar /vermouth /

ethyl alcohol /

vinegar

dairy/leguminous

vegetables/sweet

corn/wheat and

meslin flour, wheat

groats and pellets of

cereals / vegetable oil

and margarine/sugar

Main TRQs

acknowledged for

imports into the EU

Main TRQs

acknowledged for

imports into Mexico

Main TRQs

acknowledged for

imports into EU

Main TRQs

acknowledged for

imports into Chile

eggs/honey/cut

flowers/

asparagus/peas/cane

molasses/tropical

fruit/ juices (orange

and pineapple juice)

No TRQs

acknowledged

beef /meat of swine

and prepared food/

meat of sheep/meat

of poultry and

prepared food/cheese

and curd/worked

cereal

grains/prepared

mushrooms

cheese and curd/olive

oil

Source: Based on Rudloff and Simons 2004.



43

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