S. America's Mercosur pact inches closer to customs union

SAN JUAN, Argentina, Aug. 4 (UPI) -- South America's Mercosur trade bloc appears closer to becoming a customs union on the European model after leaders of the member countries met behind closed doors to clinch a deal.

Despite the optimism, however, severe difficulties remain. Some member countries remain suspicious of neighbors' export ambitions and, despite public rhetoric of friendship and warmth, barriers either remain in place or keep cropping up.

Summit host Argentina, for instance, is blocking imports from Brazil under ill-disguised anti-dumping measures, in some cases the same as those it applies to China, and Mercosur nations haven't hesitated when offered the chance to take advantage of bilateral deals with foreign partners.

Brazil is among countries still in negotiation with the European Union on bilateral deals that run counter to the spirit of the union reaffirmed in this week's Mercosur talks in San Juan.

Despite those contradictions, the leaders and senior representatives of Argentina, Brazil, Paraguay and Uruguay and associate members Bolivia, Chile, Colombia, Ecuador, Peru and Venezuela signaled their determination to push ahead with a customs union that would allow commodities to move within the region without punishing tax barriers.

Argentine President Cristina Fernandez de Kirchner said the leaders met behind closed doors and agreed on a formula to bring about a much awaited customs union.

"It's an issue we've been trying to resolve for a long time, and it's an achievement for all of us," said Fernandez, who is currently battling with the problem of stalled talks with China on soybean oil exports, worth $2 billion a year.

The soybean oil issue is a political challenge for Fernandez, who is already locked in battle with the country's farming community over disputed export tax on agricultural trade with Argentina's foreign partners. However, after the summit, Fernandez didn't go into difficulties in China or with recalcitrant farmers. Instead, she focused on what the Mercosur participants hailed as a breakthrough.

Fernandez said, "The important thing is that we have agreed on a formula and have overcome all kinds of differences."

The deal will eliminate double taxation and related transport delays as a common code is phased in before the arrangement takes full effect in 2012.

Talks on the tariff issue had gone on for years as Brazil, Argentina, Uruguay and Paraguay differed on a unified import tax that could be applied to full members and associates. Of the associates Venezuela is in line to become a full member, while Bolivia, Chile, Colombia, Ecuador and Peru want to test the waters before entering the union as full members.

As the customs accord became apparent, Mercosur leaders indicated the deal would facilitate talks with the European Union on reaching a deal that would give the Latin trade bloc a significant share of the agricultural market in Europe.