After more than 25 years of negotiations, the trade agreement between Mercosur and the European Union (EU) was approved this Friday (9) by the EU Council. Expected to be signed on the 17th in Asunción, Paraguay, The treaty lays the foundations for the world’s largest free trade zone, involving around 700 million people.
Although celebrated by governments and industrial sectors, the agreement still faces resistance from European farmers and environmentalists, who criticize possible impacts on the climate and agricultural competition. Implementation will be gradual and the practical effects should be felt over several years.
After formal signing, the agreement will still need to be approved by the European Parliament. Parties that go beyond trade policy, such as technical agreements, will require ratification in EU national parliaments, which could lengthen the timeline and open up space for disputes.
Check out the main points of the agreement:
1. Elimination of customs duties
- Gradual reduction of tariffs on most goods and services;
- Mercosur: will eliminate tariffs on 91% of European goods within 15 years;
- European Union: will eliminate tariffs on 95% of Mercosur goods within 12 years.
2. Immediate gains for the industry
- Zero tariff from the beginning for various industrial products.
>>Sectors benefited:
- Machines and equipment;
- Cars and auto parts;
- Chemicals;
- Aircraft and transport equipment.
3. Expanded access to the European market
- Mercosur companies gain preference in a market with high purchasing power;
- EU has GDP estimated at US$ 22 trillion;
- Trade tends to be more predictable and with fewer technical barriers.
4. Quotas for sensitive agricultural products
- Products such as beef, chicken, rice, honey, sugar and ethanol will have import quotas;
- Above these quotas, a fee is charged;
- Quotas grow over time, with reduced fares, rather than allowing unrestricted entry;
- Mechanism seeks to avoid abrupt impacts on European farmers;
- In the EU, quotas are equivalent to 3% of goods or 5% of the value imported from Brazil;
- In the Brazilian market, they reach 9% of goods or 8% of the value.
5. Agricultural safeguards
>>EU may temporarily reintroduce tariffs if:
- Imports grow above defined limits;
- Prices are well below the European market;
- Measure applies to chains considered sensitive.
6. Mandatory environmental commitments
- Products benefiting from the agreement cannot be linked to illegal deforestation;
- Environmental clauses are binding;
- Possibility of suspending the agreement in case of violation of the Paris Agreement.
7. Health rules remain strict
- EU does not relax sanitary and phytosanitary standards.
- Imported products will follow strict food safety rules.
8. Trade in services and investments
>>Reduction of regulatory discrimination against foreign investors.
>>Advances in sectors such as:
- Financial services;
- Telecommunications;
- Transport;
- Business services.
9. Public procurement
- Mercosur companies will be able to compete for public tenders in the EU;
- More transparent and predictable rules.
10. Intellectual property protection
- Recognition of around 350 European geographical indications;
- Clear rules on brands, patents and copyrights.
11. Small and medium-sized enterprises (SMEs)
- Specific chapter for SMEs;
- Customs facilitation measures and access to information;
- Reduction of costs and bureaucracy for small exporters.
12. Impact for Brazil
- Potential to increase exports, especially in agriculture and industry;
- Greater integration into global value chains;
- Possible attraction of foreign investments in the medium and long term.
13. Next steps
- Signing scheduled for January 17th, in Paraguay;
- Approval by the European Parliament;
- Ratification in the Congresses of Brazil, Argentina, Paraguay and Uruguay;
- Entry into force only after completion of all procedures;
- Agreements that go beyond trade policy need to be approved by the parliaments of each country.
