The Milestone EU-Mercosur Trade Deal

“This agreement is not just an economic opportunity. It is a political necessity.” In the current geopolitical context of growing protectionism and significant regional conflicts, Ursula von der Leyen’s statement says a lot.

Even though there is still a long way to go before the agreement is approved internally in each bloc and comes into force, the milestone is highly significant. It took 25 years from the start of negotiations between Mercosur and the European Union to reach a consensus text. The impacts will be considerable. Together, the blocs represent a GDP of over 22 trillion dollars, and are home to over 700 million people.

Our aim here is to highlight, in a simplified manner, the most important information about the agreement’s content and its progress, which we will update here at each stage.

What is it?

The agreement was signed as a trade treaty, with the main goal of reducing import and export tariffs, eliminating bureaucratic barriers, and facilitating trade between Mercosur countries and European Union members. Additionally, the pact includes commitments in areas such as sustainability, labor rights, technological cooperation, and environmental protection.

Mercosur (Southern Common Market) is an economic bloc created in 1991 by Brazil, Argentina, Paraguay, and Uruguay. Now, Bolivia and Chile participate as associated members, accessing some trade agreements, but not fully integrated into the common market. On the other hand, the European Union, with its 27 members (20 of which have adopted the common currency), is a broader union with greater economic and social integration compared to Mercosur.

What does the EU Mercosur agreement include?

Trade in goods:

• Reduction or elimination of tariffs on products traded between the blocs, such as meat, grains, fruits, automobiles, wines, and dairy products (the expected reduction will affect over 90% of the traded goods between the blocks).
• Easier access to European high-tech and industrialized products.

Trade in services:

• Expands access to financial services, telecommunications, transportation, and consulting for businesses in both blocs.

Movement of people:

• Provides facilities for temporary visas for qualified workers, such as technology professionals and engineers, promoting talent exchange.
• Encourages educational and cultural cooperation programs.

Sustainability and environment:

• Includes commitments to combat deforestation and meet the goals of the Paris Agreement on climate change.
• Provides penalties for violations of environmental standards.

Intellectual property and regulations:

• Protects geographical indications for European cheese, wines, and South American coffee and cachaça.
• Harmonizes regulatory standards to reduce bureaucracy and avoid technical barriers.

Labor rights:

• Commitment to decent working conditions and compliance with International Labor Organization (ILO) standards.

Which benefits to expect?

• Access to new markets: Mercosur companies will have easier access to the European market, which has more than 450 million consumers, while European products will become more competitive in South America.
• Costs reduction: The elimination or reduction of tariffs could lower the prices of products such as wines, cheese, and automobiles and boost South American exports of meat, grains, and fruits.
• Strengthened diplomatic relations: The agreement symbolizes a bridge of cooperation between two regions historically connected by cultural and economic ties.

What’s next?

The signing is only the first step. For the agreement to come into force, it must be ratified by both blocs, and the approval process is quite distinct between them, since Mercosur does not have a common Council or Parliament.

In the European Union, the ratification process involves multiple institutional steps:

• Council of the European Union: Ministers from the member states will discuss and approve the text of the agreement. This step is crucial, as each country has representation and may raise specific national concerns.
• European Parliament: After approval by the Council, the European Parliament, composed of elected deputies, votes to ratify the agreement. The debate at this stage may include environmental, social, and economic impacts.
• National Parliaments: In cases where the agreement affects shared competencies between the bloc and member states (such as environmental regulations), it must also be approved by the parliaments of each member country. This can be challenging, given that countries like France and Ireland have already expressed specific concerns about agricultural and environmental issues.

In Mercosur, the approval depends on each member country:

• National Congresses: The agreement text is submitted to the parliaments of Brazil, Argentina, Paraguay, and Uruguay. Each congress evaluates independently, and approval depends on the political majority in each country.
• Political Context: Mercosur countries have diverse political realities. In Brazil, for example, environmental issues can spark heated debates, while in Argentina, the impact on agricultural competitiveness may be the focus of discussion.
• Regional Coordination: Even after national approval, it is necessary to ensure that all Mercosur members ratify the agreement, as the bloc acts as a single negotiating entity.

Stay tuned: you will find the update here as the processes advance.