The 28th of June 2019 is already a historic day for international trade. After 20 years of negotiations, Mercosur and the European Union reached a political agreement on trade. It is part of a more comprehensive Association Agreement between the two blocs, which is also composed of a political and a cooperation pillar. The event is especially important in the current context of international trade tensions and shows a commitment of both regions to advance an open agenda, based on dialogue and free trade.
The Mercosur-EU Free Trade Agreement will be the most significant trade agreement ever made in terms of population covered, creating a market of 780 million people, and covering about 20% of the global trade. It covers both tariff and regulatory issues, such as services, government procurement, trade facilitation, technical barriers, sanitary and phytosanitary measures, and intellectual property. It is estimated that the agreement will lead to an increase of almost US$ 100 billion to the EU and save over €4 billion worth of duties per year.
The agreement will eliminate tariffs from the majority of exported products, such as manufactured goods, orange juice, and coffee. Other sensitive products, including meat, ethanol, and sugar, will gain market access through quotas. There is also the recognition of Geographical Indications (GI) for unique products from both regions, such as cheeses and wines.
Although trade is undoubtedly one of the main aspects of the new Association Agreement, other elements will be covered. For instance, both parties commit to implement the Paris Climate Agreement effectively and equally safeguard the EU and Mercosur’s rights to regulate in the public interest.
Although it is a highly significant step, the political agreement is just one step of a lengthy procedure. Now, both sides will perform a legal revision of the agreed text to come up with the final version of the Association Agreement and all its trade aspects. After that, the wording must be submitted to the Parliament of the parties for ratification.