EU and Mercosur secure massive, historic trade deal after 20 years of talks

By Marie Singer

EU_Mercosur_Trade_Deal_KeypointsMercosur and the European Union have secured a massive trade deal after over two decades of negotiations.

The deal creates a trade bloc of 780 million people with a total economic output of €19 trillion.

Mercosur, or Mercosul, officially Southern Common Market, is a South American trade bloc which consists of Argentina, Brazil, Paraguay and Uruguay.

The EU is currently Mercosur’s biggest trade and investment partner and its second largest for trade in goods.

The Mercosur bloc is a market for 60,500 EU companies and a major destination for EU investments, with €381 billion in investment stocks in 2017

A European Union news release said: “The new trade framework — part of a wider Association Agreement between the two regions — will consolidate a strategic political and economic partnership and create significant opportunities for sustainable growth on both sides,”

According to EU Commission chief Jean-Claude Juncker, this was the EU’s biggest deal to date.

What will the deal do?

  • Remove most of tariffs on EU exports to Mercosur – making EU companies more competitive by saving them €4 billion worth of duties per year.
  • Eliminate high customs duties in key EU export sectors: cars and parts, machinery, chemicals and pharmaceuticals.
  • EU companies will have much better access to the Mercosur market than the South American bloc gives to businesses from other countries.
  • Allow EU firms to bid for public contracts on equal terms with Mercosur companies.
  • European companies in the Mercosur will be able to import parts and intermediate goods more easily.
  • Offer small businesses an online platform providing easy access to information on market requirements and customs rebates.

In addition, Mercosur countries will put in place “legal guarantees protecting from imitation 357 high-quality European food and drink products recognised as Geographical Indications (GIs).”

“This is a historical moment,” said Jean-Claude Juncker, president of the European Commission, the EU’s executive arm. “In the midst of international trade tensions, we are sending today a strong signal with our Mercosur partners that we stand for rules-based trade.”

EU Commissioner for Trade Cecilia Malmström said: “Today’s agreement brings Europe and South America closer together in a spirit of cooperation and openness. Once this deal is in place, it will create a market of 780 million people, providing enormous opportunities for EU businesses and workers in countries with whom we have strong historical links and whose markets have been relatively closed up to now.

“The agreement will save European companies over €4 billion in duties at the border – four times as much as our deal with Japan – whilst giving them a head start against competitors from elsewhere in the world. It also sets high standards and establishes a strong framework to jointly address issues like the environment and labour rights, as well as reinforcing sustainable development commitments we have already made, for example under the Paris Agreement.

“Over the past few years the EU has consolidated its position as the global leader in open and sustainable trade. Agreements with 15 countries have entered into force since 2014, notably with Canada and Japan. This agreement adds four more countries to our impressive roster of trade allies.”

Brazilian President Jair Bolsonaro hailed the deal as “historic” and “one of the most important trade deals of all time”.