EU-Mercosur Association Agreement main subject tariff
Background
The agreement in principle came after twenty years of negotiation. Talks began in 1999, but stalled before regaining momentum in 2016. Talks had foundered for years due to opposition from European beef producers, especially small farmers who feared being undercut on price by imports from Brazil, the world's biggest beef producer. Many governments in South America at this time preferred "south-south co-operation" to developing ties with Europe, while European governments similarly had other priorities.The growing use of protectionist policies by national leaders is considered to have spurred the renewal of talks in 2016. The EU may have hoped that the emerging deal would represent a significant break in this global renewal of protectionism. European Commission President Jean-Claude Juncker cited the deal as an endorsement of "rules-based trade" in a time of growing protectionism. Mercosur may be hoping to use the deal as a model for future deals. Mercosur's presidents have already stated that they want to reach trade agreements with Canada and the European Free Trade Association. Argentina's president Mauricio Macri has said that the agreement with the EU is "not a point of arrival but of departure".In 2018, the EU was already Mercosur's largest trading and investment partner. 20.1% of the trade bloc's exports went to the EU in 2018. Mercosur exports to the EU were worth €42.6 billion in that year, while EU exports to the Mercosur countries were worth €45 billion. Mercosur's biggest exports to EU countries are agricultural products such as food, beverages and tobacco, vegetable products including soya and coffee, and meat and other animal products. Europe's biggest exports to Mercosur include machinery, transport equipment, and chemical and pharmaceutical products. The EU exported €23 billion worth of services to the South American trade bloc in 2017 while about €11 billion worth of services came from Mercosur into Europe.Despite the value of the trading, significant tariffs remain in place, meaning potential expansion of markets should these tariffs be removed. The EU wants more access for its manufactured goods especially cars, which face tariffs of 35%, and more access to contracts for its firms and wine and cheese to sell. The primary aim of the Mercosur countries is to boost sales of farm commodities.Features
The combined population of the two regions means that the deal would involve a population of 780 million. It would be the largest free trade deal agreed by Mercosur since the bloc's launch in 1991 and would also represent the EU's largest trade deal to date, in terms of tariff reduction.For Mercosur the planned deal will eliminate 93% of tariffs to the EU and grant “preferential treatment” for the remaining 7%. The deal will allow increased access to the European market for Mercosur's agricultural goods, notably beef, poultry, sugar and ethanol. The deal will probably also be good for Brazilian juice exporters and Argentine fish exporters. It will also remove 91% of tariffs on EU exports to the Mercosur countries. According to the Financial Times, “some of the most important wins for Europe include the slashing of duties on cars and car parts, chemicals, machinery and textiles, and improved market access for EU wine and cheese”. €4.5 billion worth of duties will be saved, according to the European Commission. The deal includes a standstill clause whereby remaining tariffs will not be raised above an agreed rate.The scope of the agreement is very broad. Besides tariffs, it covers Rules of Origin, Trade Remedies, Sanitary and Phytosanitary Measures (SPS), Technical Barriers to Trade (TBT), Services and Investment liberalization, Competition Policy, Subsidies, State Owned Enterprises (SOE), Trade and Sustainable Development. It also includes increased access to public procurement contracts and Intellectual Property Rights including "Geographical Indications" or protection for regional food specialities. Legal guarantees will be put in place protecting 357 European food and drink products from imitation including Prosciutto di Parma and Fromage de Herve. Customs procedures will also be simplified under the deal.If ratified, the changes will be phased in over 15 years.