Brazil and Argentina advocate for new agreements to counter Trump-era protectionism.

By Lisandra Paraguassu, Reuters - Brazil, Argentina, and the other Mercosur countries should take advantage of the current moment to invest in new trade agreements, especially with the European Union and Mexico, Presidents Michel Temer and Mauricio Macri stated on Tuesday during the Argentine head of state's visit to Brasília.

"The European Union is showing greater interest in an agreement now, and we must be ready for this negotiation and for all others that may arise, such as with the Pacific Alliance and with Mexico. Mexico is now looking south with greater attention," Macri said in a press statement at the Planalto Palace after the meeting with Temer.

"We raised the issue of ever greater integration of Latin America, particularly South America, including Mexico, to foster a closer relationship between Mercosur and the Pacific Alliance," said Temer.

The President of the United States, Donald Trump, was not directly mentioned in any of the statements by the South American presidents, but the analysis was clear that Mercosur should take advantage of the current increase in protectionism and the shift in US trade policy.

Since taking office three weeks ago, Trump has withdrawn the United States from negotiations on the Trans-Pacific Partnership with 12 Asian countries, wants to review NAFTA, the trade agreement with Canada and Mexico, and threatens to impose a 20 percent tariff on Mexican products to finance a wall between the two countries' borders.

The scenario, a diplomatic source told Reuters, is conducive to Mercosur occupying a larger space, if it is able to accelerate the resolution of its internal problems. The agreement with the European Union itself, practically stalled for the last three years, could move forward this year.

The bloc is also seeking a tariff reduction agreement with Mexico, the only major Latin American country with which trade relations have not yet progressed. In addition, it has opened consultations for possible agreements with Japan and South Korea.

Improving relations with the Pacific Alliance is also on Mercosur's radar.

The agreement signed between Mexico, Colombia, Peru, and Chile has always been used as a counterpoint to Mercosur, despite the countries having managed to negotiate an advance in tariff reductions that practically eliminates import tariffs between them until 2019 -- with the exception of Mexico, where tariffs were abolished on only 7 percent of Brazilian products.

"With Mexico it's different, we haven't gotten there yet. But we will negotiate directly. For now, they are showing more interest," the source said.

With the Pacific Alliance as a whole, the source analyzes, the issue is more political than commercial. "When the Alliance was created, there was a contrast in policies with Mercosur. Today, that contrast in thinking is no longer so pronounced; today the message is one of closeness," he stated.

The two blocs are negotiating a meeting of foreign ministers for next April to address bureaucratic obstacles to trade and other integration issues.

Obstacles in Mercosur

Macri's visit, however, did not make progress on two issues dear to the Brazilian government: the entry of sugar into the Argentine market and the restrictions imposed by Argentina on Brazilian auto parts.

The Argentinians showed a willingness to negotiate on the sugar issue, but there is no solution in sight yet for the auto parts crisis. Created last year, the new Argentine regime for the sector gives tax credits to automakers for the purchase of locally manufactured components, which is considered tax warfare by the Brazilian government.

"It's a relevant issue. It was discussed, there are no taboo subjects in the relationship with Argentina, but it was only a reference. Negotiations are progressing, but there is no solution in sight," the source said.

In April of this year, there will be a ministerial-level meeting in Buenos Aires to try to resolve the problem. The Brazilian government requested a postponement of the implementation of the rules last year, and it was granted. But now the Argentine government must begin to put them into practice, while Brazilian negotiators assess this as a violation of World Trade Organization rules and a possible complaint to the organization.

BARRIERS

One of the most concrete results of a primarily political visit was the decision to invest in a program to converge technical, sanitary, and phytosanitary standards in order to facilitate trade between Brazil, Argentina, and, subsequently, the other countries in the bloc.

The two presidents signed a letter addressed to the Inter-American Development Bank (IDB) requesting assistance in establishing standards, with the intention of later creating a binational agency.

"To make trade and investment flows more fluid, we have to reduce, and this is what was discussed, we have to reduce to a minimum the technical, sanitary and phytosanitary barriers," Temer stated.

"This new agency that we are proposing, I believe, will be another leap forward in facilitating free movement and strengthening productive integration," Macri argued.