A free trade area with 773 million inhabitants: here is the EU-Mercosur agreement

A commercial agreement from recaord that provisionally signed by the Commission and the 4 South American countries (Brazil, Argentina, Paraguay and Uruguay). Here’s everything you need to know.

A population of 773 million inhabitants. A turnover between goods and services of at least 122 billion per year. Around € 4 billion less in tariffs for European companies. These are some of the most striking numbers of the free trade agreement reached by the EU Commission and the Mercosur countries (Brazil, Argentina, Paraguay and Uruguay) after almost 20 years of negotiations.

Now the ball will pass into the hands of the Member States and the European Parliament. Where the front of the discontented, in particular the French breeders and a part of the Italian agri-food sector, will be able to try to assert their claims. But in the meantime the first draft of the agreement is closed. Let’s see the main aspects.

The value of exchanges

The current bilateral EU trade with Mercosur amounts to 88 billion euros per year for goods and 34 billion euros for services. The EU exports goods worth € 45 billion a year to Mercosur countries and imports Mercosur products of almost the same value (€ 43 billion). The ‘gain’ in terms of trade balance for the EU lies mainly in the services: we export 23 billion a year compared to the 11 billion euro of services provided to EU customers by Mercosur companies.

The duty cuts

The agreement provides for the mutual and progressive elimination of duties on a series of products. Mercosur has undertaken to eliminate tariffs on 91% of imported EU goods. These include cars (taxed today at 35%), auto parts (taxed from 14 to 18%), machinery (taxed from 14% to 20%), chemicals (taxed up to 18%), clothing and leather shoes (taxed up to 35%). In the agri-food sector, the duties of Mercosur on wine (taxed today at 27%), chocolate (taxed at 20%), biscuits (taxed from 16 to 18%), canned peaches (taxed at 55%) will be progressively eliminated ) and soft drinks (taxed at 20-35%). On the other hand, the EU undertakes to eliminate duties on 92% of goods imported from Brazil, Argentina, Paraguay and Uruguay.

The Mercosur countries have also undertaken to protect 357 high quality European food and drink products recognized as geographical indications, including Parma Ham.

Food safety

The EU and Mercosur are committed to strengthening joint work on sanitary and phytosanitary issues, which concern food safety and the health of animals and plants, to ensure rapid intervention in the event of emergencies related to the import and export of products agricultural and fisheries. Among other things, this cooperation will include increased transparency, rapid exchange of information and technical advice, bilateral and international cooperation in key areas, official controls and certification, as well as import controls at borders.

The agreement also explicitly supports the “precautionary principle”, whereby public authorities will continue to have the legal right to act to protect human, animal or plant health or the environment, faced with a perceived risk even when the scientific analysis is not conclusive.

Environment and workers’ rights

The agreement includes a chapter dedicated to sustainable development which will cover issues such as sustainable management and forest conservation, respect for workers’ rights and the promotion of responsible business conduct. It also offers civil society organizations an active role in the overview of the implementation of the agreement, including any environmental problems.

The agreement will also provide a new forum for working closely on a more sustainable approach to agriculture.

Thanks to this agreement, the EU and Mercosur are also committed to effectively implement the Paris agreement on climate change and to work towards the transition to a sustainable low-carbon economy. This includes inter alia the commitment to tackle deforestation.

The agreement also includes the obligation to effectively implement the fundamental standards of the International Labor Organization which cover subjects such as freedom of association, the right to collective bargaining, the elimination of all forms of forced and compulsory labor, the abolition of child labor and non-discrimination.

Both parties undertake not to derogate or effectively enforce labor and environmental legislation to encourage trade or investment and to promote responsible business conduct and corporate social responsibility, in line with principles and guidelines of the UN and the OECD.

The part of the trade agreement on sustainable development will have clear and robust rules and will include a mechanism for independent and impartial evaluation of these issues by a group of experts.

Services

Each year the EU exports more than 20 billion euros in services to Mercosur countries. The deal will make it easier for European businesses to provide services to Mercosur’s rapidly expanding market and offer new investment opportunities. The covered services include a wide range of sectors and sector-specific regulatory provisions for postal and courier services, telecommunications and financial services. The agreement also contains advanced provisions on the movement of professionals for commercial purposes.

E-commerce

The agreement contains general rules relating to e-commerce which aim to remove unjustified barriers to exchanges made by electronic means, to guarantee legal certainty for companies and to guarantee a safe online environment for consumers, with adequate protection of their data.

procurement

For the first time, Mercosur countries will open their public procurement markets to EU companies. The trade agreement will also make tender procedures more transparent. The same will be true for Mercosur companies that intend to operate in the EU.

Bilateral safeguard mechanism

The agreement includes a bilateral safeguard mechanism. It allows the EU and Mercosur to impose temporary measures to regulate imports in the event of an unexpected and significant increase in imports which could put certain sectors at risk. These guarantees also apply to agricultural products.

Dispute resolution

The agreement sets up a mechanism to resolve disputes that may arise regarding the interpretation and application of its provisions, including through the opinions of independent members.