The European Union and MERCOSUR have delayed negotiations on a possible free trade agreement to September. Both sides met in Brussels to possibly form a free trade agreement, but both parties failed to agree on certain measures about tariffs. These negotiations over a free trade agreement began nearly 20 years ago, but recent conflicts such as the EU ban of certain Brazilian beef exporters. The trade deal could also be beneficial for Brazilian sugar and ethanol exports as Brazil currently exports $670 million worth of raw sugar to the EU, despite large EU tariffs. MERCOSUR offered to decrease import duties on European auto producers in exchange for Europe decreasing tariffs on ethanol, which the EU refused. Another issue at stake was the negotiations of increasing the importation of Brazilian and Argentine beef to EU countries from 70,000 tones to nearly 100,000 tones.
Also cited as a possible reason for the delay in negotiations is the upcoming presidential election in Brazil. The Temer administration may be delaying negotiations to create more favorable terms and mitigate the possible backlash in the election if the trade agreement were to have a less favorable outcome for Brazilian farmers. The EU is also in Brexit talks. Nonetheless, this year has been a busy year politically for both sides. Countries such as Germany, Spain and Portugal are heavily in favor of a free trade agreement with MERCOSUR because many of them consume Brazilian orange juice, rice and sugar. Brazil exports more than $2 billion worth of orange juice to EU countries alone. Germany also consumes nearly 50% of all Argentine beef exports, worth around $300 million annually.
The European Union recently signed a ground breaking free trade agreement with Japan to decrease trade barriers on Japanese auto parts and European cheese exports to Japan. This year has been a great opportunity for both sides to put aside their differences and come to an agreement, as the rise of protectionism in the United States has made Europe look elsewhere for trade. Brazil and Argentina have strong potential of becoming agricultural power houses in the world economy. Europe heavily depends on Brazil for its raw materials and food products, while Argentina exports soybeans and beef. Talks will resume in September in Montevideo. If both sides come to an agreement, this will be a great victory for Brazilian agriculture and consumers from all countries.
Subscribe to our newsletter to stay updated! http://sideraconsult.com/newsletter/
– Benjamin Tracy