Key facts about the blockbuster EU-Mercosur trade deal

Brussels – The trade agreement between the EU and the countries known as Mercosur (Brazil, Argentina, Uruguay, Paraguay) has been negotiated for 20 years and is set to be one of the most ambitious in the world.

 

– Size –

 

Taking into account the GDP of all the countries concerned, the agreement concluded by the EU in 2018 with Japan is slightly larger (19.5 trillion euros) than that with Mercosur (18 trillion euros).

But in terms of population, the EU-Mercosur agreement is bigger, involving 770 million people, ahead of the EU-Japan’s deal covering 630 million.

The EU and Mercosur exchange 88 billion euros in goods annually, with a balance very slightly in favour of the Europeans (+2.5 billion euros).

These exchanges place Mercosur between India and Canada, in 10th place among the EU’s main trading partners.

But the trade remains modest compared with the 675 billion euros exchanged each year by Europeans with the United States, their main partner.

The EU is Mercosur’s largest trading partner after China.

 

– Advantages –

 

The agreement is set to eliminate South American tariffs against the EU that are still very high in some key industrial sectors: 35 percent in the clothing and automotive sector — which are at the heart of the agreement — or 14 percent in the pharmaceutical industry.

In agriculture, these customs duties are now high for spirits (35 percent), dairy products (28 percent), chocolate (20 percent) or wine (20 percent).

The agreement also aims to protect European geographical indications on products such as Cognac or Manchego cheese. These goods often exist in the Americas because of historical links between the two regions.

The EU is also counting on the agreement to improve access to the South American market for services (telecommunications, transport or financial services).

Trade in goods between the EU and Mercosur

 

– EU concessions –

 

The EU will have to open its market to beef, ethanol, sugar and poultry exports from the Mercosur nations — these are all crucial sectors for the South Americans, but also very sensitive for European producers who have strongly opposed the trade deal.

To protect its market, the EU is setting up quotas: politically sensitive imports will not be taxed when they arrive in Europe up to a certain threshold, above which customs duties will again be applied.

These quota thresholds were also imposed on Canada and Japan.

 

– Environment –

 

Like all the agreements recently signed by the EU, this one includes a chapter on sustainable development.

According to the commission, this chapter will cover areas such as “forest conservation, wildlife trade and respect for workers’ rights”.

Despite these non-binding commitments, several NGOs have expressed concern, particularly because of the “ecological situation in Brazil” since the inauguration in January of far-right President Jair Bolsonaro.

Bolsonaro is pursuing a policy that favours agribusiness, a major business in his country’s economy, but which, according to activists is destroying the Amazonian forest.

 

– Unknowns –

 

The agreement negotiated by the commission with Mercosur must now be approved by all 28 member states, which is not an easy task in Europe, where public opinion increasingly questions the benefits of free trade and its impact on the climate, even in traditionally trade-friendly countries.

In 2016, Belgium alone almost ruined the signing of the highly controversial CETA trade agreement with Canada. But the desire to make the EU a champion of free trade against US President Donald Trump-led protectionism could work in favour of the deal.

If so, the accord will then have to be validated by a vote in the European Parliament.

By Clement Zampa