Here is all you need to know about the blockbuster EU-Mercosur trade deal

In this July 14, 2017 file photo, Argentina's Foreign Minister Jorge Faurie attends a meeting at the Itamaraty Palace, in Brasilia, Brazil. The Argentine Foreign Ministry said in a statement on Friday, June 28, 2019, that South America’s Mercosur trade bloc has struck a “strategic association” trade deal with the European Union, clinched in the Belgian capital of Brussels following two decades of negotiations. The Mercosur bloc includes Argentina, Brazil, Paraguay and Uruguay. Image Credit: AP

Also in this package Canada takes a first step toward ratifying trade deal with US, Mexico

Europe and South America's leading customs union struck a free-trade deal after 20 years of talks, notching up a major win in a global market-opening drive that counters the protectionism of US President Donald Trump.

Top European Union officials reached a breakthrough in free-trade negotiations with counterparts from the Mercosur group of Argentina, Brazil, Paraguay and Uruguay, paving the way for an agreement to expand goods shipments worth almost 90 billion euros ($102 billion) a year. The pact is slated to be among the EU's biggest.

Both sides settled longstanding differences over Mercosur demands for greater access to the EU agricultural market, including for beef and sugar, and European calls for South America to lower automotive-import barriers.

Bringing to an end two decades of talks, the deal struck on Friday in Brussels follows groundbreaking European free-trade accords with Canada and Japan and adds political momentum to EU negotiations with Australia and New Zealand. It comes as government heads from the Group of 20 leading economies meet in Japan with the focus on Trump's trade war with China and planned meeting on Saturday with his Chinese counterpart.

Europe is fighting to uphold a 70-year-old global commercial order threatened by Trump's "America First" agenda, which has sparked US tariff battles against strategic allies and rivals alike, rattled the foundations of the World Trade Organization and darkened the economic outlook.

The EU, the world's largest trading bloc with more than 500 million consumers, is also seeking to underscore its commercial clout as the UK prepares to leave by October 31. While Brexit will force Britain to take charge of its own trade policy for the first time in almost 50 years, the country hopes to piggyback on the market-opening pacts already struck by the EU.

Latin Celebrations

The deal is the largest and most complex ever struck by Mercosur and South American governments were quick to celebrate its signing.

"Together, Mercosur and the EU represent a quarter of the global economy and now Brazilian producers will have access to this enormous market," Brazilian President Jair Bolsonaro wrote on Twitter. "Great day!"

A press statement released by the Brazilian economy ministry said that the deal would result in an increase in GDP of $87.5 billion over the next 15 years, a number that could rise to $125 billion.

'The Mercosur-EU deal is much more than a trade agreement,' said Argentine Foreign Affairs Minister Jorge Faurie. 'It's a strategic advance in Argentina's position on the global stage that strengthens the commercial agenda of both our country and our bloc.'

Key facts about the blockbuster EU-Mercosur trade deal

Taking into account the GDP of all the countries concerned, the agreement concluded by the EU in 2018 with Japan is slightly larger (19.5 trillion euros) than that with Mercosur (18 trillion euros).

But in terms of population, the EU-Mercosur agreement is bigger, involving 770 million people, ahead of the EU-Japan's deal covering 630 million.

The EU and Mercosur exchange 88 billion euros in goods annually, with a balance very slightly in favour of the Europeans (+2.5 billion euros).

These exchanges place Mercosur between India and Canada, in 10th place among the EU's main trading partners.

But the trade remains modest compared with the 675 billion euros exchanged each year by Europeans with the United States, their main partner.

The EU is Mercosur's largest trading partner after China.

Advantages

The agreement is set to eliminate South American tariffs against the EU that are still very high in some key industrial sectors: 35 percent in the clothing and automotive sector - which are at the heart of the agreement - or 14 percent in the pharmaceutical industry.

In agriculture, these customs duties are now high for spirits (35 percent), dairy products (28 percent), chocolate (20 percent) or wine (20 percent).

The agreement also aims to protect European geographical indications on products such as Cognac or Manchego cheese. These goods often exist in the Americas because of historical links between the two regions.

The EU is also counting on the agreement to improve access to the South American market for services (telecommunications, transport or financial services).

EU concessions

The EU will have to open its market to beef, ethanol, sugar and poultry exports from the Mercosur nations - these are all crucial sectors for the South Americans, but also very sensitive for European producers who have strongly opposed the trade deal.

To protect its market, the EU is setting up quotas: politically sensitive imports will not be taxed when they arrive in Europe up to a certain threshold, above which customs duties will again be applied.

These quota thresholds were also imposed on Canada and Japan.

Environment

Like all the agreements recently signed by the EU, this one includes a chapter on sustainable development.

According to the commission, this chapter will cover areas such as "forest conservation, wildlife trade and respect for workers' rights".

Despite these non-binding commitments, several NGOs have expressed concern, particularly because of the "ecological situation in Brazil" since the inauguration in January of far-right President Jair Bolsonaro.

Bolsonaro is pursuing a policy that favours agribusiness, a major business in his country's economy, but which, according to activists is destroying the Amazonian forest.

Unknowns

The agreement negotiated by the commission with Mercosur must now be approved by all 28 member states, which is not an easy task in Europe, where public opinion increasingly questions the benefits of free trade and its impact on the climate, even in traditionally trade-friendly countries.

In 2016, Belgium alone almost ruined the signing of the highly controversial CETA trade agreement with Canada. But the desire to make the EU a champion of free trade against US President Donald Trump-led protectionism could work in favour of the deal. </s> FILE – In this July 14, 2017 file photo, Argentina’s Foreign Minister Jorge Faurie attends a meeting at the Itamaraty Palace, in Brasilia, Brazil. The Argentine Foreign Ministry said in a statement Friday, June 28, 2019, that South America’s Mercosur trade bloc has struck a “strategic association” trade deal with the European Union, clinched in the Belgian capital of Brussels following two decades of negotiations. The Mercosur bloc includes Argentina, Brazil, Paraguay and Uruguay. (AP Photo/Eraldo Peres, File)

BUENOS AIRES, Argentina (AP) — South America’s Mercosur bloc and the European Union struck a free-trade deal Friday after two decades of negotiations that concluded amid global trade tensions and rising protectionism.

The agreement announced by both sides came as trade talks between the EU and the United States have stalled with the Trump administration threatening to impose tariffs on all autos, a major European export to the U.S.

“In the midst of international trade tensions, we are sending today a strong signal with our Mercosur partners that we stand for rules-based trade,” European Commission President Jean-Claude Juncker said following the clinching of the deal in the Belgian capital of Brussels.

Juncker described the pact with the bloc made up of Argentina, Brazil, Paraguay and Uruguay as “an historic moment” that came 20 years after talks were launched. It shows the European bloc is determined to remain a flag-bearer of the global trade system at a time when it is being challenged by a Trump administration skeptical of free trade.

Argentina’s Foreign Ministry said the agreement “will mean the integration of a market of some 800 million people, nearly a fourth of the world’s gross domestic product and more than $100 billion in bilateral trade of goods and services.”

The ministry said the deal also is aimed at strengthening political and cultural ties with the EU, improving access to goods, services and investments by reducing restrictions and easing access to technology and raw materials.

Juncker said the deal would remove most tariffs on EU exports to Mercosur, saving more than 4 billion euros ($4.5 billion) worth of duties each year, four times as much as Europe’s pact with Japan.

The commission, which negotiates trade deals on behalf of the 28-nation EU, said the agreement is particularly important for industrial sectors like cars and car parts, machinery, chemicals, pharmaceuticals as well as clothing and footwear. Mercosur hopes to benefit with more exports of agricultural products including beef, poultry and sugar.

The EU’s farm and food sector also stands to gain, particularly products like chocolates, wine and spirits.

“The basics of this deal have been quite clear for some time. It’s cars and machinery and agriculture. But in the past, politics have stood in the way. Particularly in Brazil, which has had a very protectionist policy focusing on domestic production,” said Jacob Funk Kirkegaard, senior fellow, at the Peterson Institute for international economics.”And at the same time, the Europeans have been very protective of their agricultural sector.”

The commission said the deal, which still must be ratified by the legislatures of all the countries involved, will also ease border checks and cut red tape.

The agreement brings to 15 the number of pacts the EU has concluded since 2014, most recently with Canada and Japan, and comes as the bloc pushes ahead with international trade deals.

Brazilian President Jair Bolsonaro called it one “of the most important trade agreements of all times.”

The Brazilian government said the deal would boost Latin America’s largest economy by slashing tariffs for some agricultural products like orange juice, fruit and instant coffee, and expanding access via quotas for beef, ethanol and sugar.

“Brazilian companies will benefit from the elimination of tariffs on exports of 100 percent of industrial products. That will equalize the conditions of competition with other partners that already have free trade agreements with the EU,” it said.

The deal is “a game changer in Latin America as a whole, which historically has been very protectionist,” Kirkegaard said. “This could herald in a new era for Mercosur.”

Negotiations began on June 28, 1999, but have taken a long, torturous path marked by breaks and frustrations, as the countries’ different sensitivities and priorities were taken into account.

But EU Trade Commissioner Cecilia Malmstrom said the talks gathered momentum early this year, aided in part by a new Brazilian government that made the deal one of its priorities, and were pushed over the line by intensive negotiations over the last three days in Brussels.

“This is a landmark agreement,” Malmstrom told reporters in Brussels, flanked by negotiators and senior officials.

“With this deal we are showing that we believe that trade is a good thing. It brings people and companies together, and we send a loud and clear message in support of open, sustainable, mutually beneficial, rule-based trade.”

Cook reported from Brussels. Associated Press writers Almudena Calatrava in Buenos Aires, Argentina, Carson Gardiner and Yesica Fisch in Rio de Janeiro and Chris Rugaber in Washington contributed to this report. </s> BUENOS AIRES (Reuters) - Argentina said on Friday that the Mercosur trade bloc clinched a “strategic association” trade deal with the European Union.

The deal was agreed in Brussels after more than 20 years of negotiations, the Argentine government said in a statement. The Mercosur trade bloc consists of Argentina, Brazil, Uruguay and Paraguay. </s> DUBLIN/BRUSSELS, Aug 23 (Reuters) - The European Union piled pressure on Friday on Brazilian President Jair Bolsonaro over fires raging in the Amazon basin, with Ireland and France saying they could block a trade deal with South America.

Bolsonaro has rejected what he calls foreign interference in domestic affairs in Brazil, where vast tracts of the Amazon rainforest are ablaze in what is known as the burning season. He said the army could be sent to help fight the fires.

French President Emmanuel Macron's office said Bolsonaro had lied in playing down concerns about climate change at the G20 summit in Japan in June and that, in this light, France would oppose the deal struck between the EU and the Mercosur countries: Brazil, Argentina, Uruguay and Paraguay.

Irish Prime Minister Leo Varadkar said Dublin would vote against the deal unless Brazil acted to protect the rainforest.

Varadkar said he was very concerned at the record levels of rainforest destruction, and that the Irish government would closely monitor Brazil's environmental actions in the two years until the Mercosur deal was ratified.

"There is no way that Ireland will vote for the EU-Mercosur Free Trade Agreement if Brazil does not honour its environmental commitments," he said in a statement.

Ireland and France would need other EU states to help form a blocking minority if they want to kill the deal, reached in June after 20 years of negotiations.

The Irish government is under pressure to defend its beef farmers, already suffering from Britain's looming EU exit and low prices, by seeking to ensure Mercosur countries do not flood the market with cheaper beef.

But the EU executive, the European Commission, warned against burying the deal, saying it could help to put pressure on Brazil.

"This is the best way to create legally binding commitments with countries that we want to respect our environmental standards," said Commission spokeswoman Mina Andreeva. "The best tool that we have is the EU-Mercosur agreement."

She noted that the text included punitive mechanisms to be used if certain climate-related conditions were not met.

Finland, which currently holds the EU's rotating presidency, suggested a ban on Brazilian beef imports. Prime Minister Antti Rinne said the fires were "a threat to our whole planet, not just to Brazil or South America".

"We must find out whether the Europeans have something to offer Brazil to help prevent this kind of fires in the future," he added.

Finland's finance minister said he would raise the issue with his EU peers at a meeting in Helsinki on Sept. 13-14.

Leaders of the world's most advanced economies are also expected to discuss the matter when they meet for the G7 summit in France this weekend. </s> BUENOS AIRES (Reuters) - Argentina said Wednesday that it has sent the regional bloc Mercosur its ratification of the group's 2010 trade agreement with Egypt, and the pact will go into force within a month.

The trade deal, which covers food, cars, auto parts and industrial supplies, was signed by Egypt and Mercosur members Argentina, Brazil, Uruguay and Paraguay in 2010, but it did not go into effect because Argentina's Congress had not approved it.

Argentina's Congress signed off on the deal in May and Argentina has sent Mercosur its formal ratification, the last step needed for implementation, Argentina's production ministry said.

"In 30 days the agreement will be in full force," the ministry said in a statement on Wednesday.

The deal will eliminate tariffs on 60 percent of Argentina's exports immediately and phase in reduced tariffs for other products over 10 years, the ministry said.

Tariffs in Argentina on imports of beef, pears, apples and cars and auto parts from Egypt will also be lifted, it added.

The announcement comes as Mercosur has been seeking to finalize trade deals with other blocs and countries, including the European Union, Canada and South Korea, after pro-business governments took office in Argentina and Brazil. </s> The European Union piled pressure on Friday on Brazilian President Jair Bolsonaro over fires raging in the Amazon basin, with Ireland and France saying they could block a trade deal and Finland urging a ban on Brazilian beef imports.

Bolsonaro has rejected what he calls foreign interference in domestic affairs in Brazil, where vast tracts of the Amazon rainforest are ablaze in what is known as the burning season.

Environmentalists have blamed deforestation for an increase in fires and accuse the right-wing president of relaxing protection of a vast carbon trap and climate driver that is crucial to combating global climate change.

French President Emmanuel Macron’s office said Bolsonaro had been lying when he played down concerns about climate change at the G20 summit in Japan in June and that, in this light, France would oppose the farming deal struck between the EU and the Mercosur countries: Brazil, Argentina, Uruguay and Paraguay.

Irish Prime Minister Leo Varadkar said Dublin would vote against the free trade deal unless Brazil acted to protect the rainforest.

Varadkar said he was very concerned at the record levels of rainforest destruction, and that the Irish government would closely monitor Brazil’s environmental actions in the two years until the Mercosur deal was ratified.

“There is no way that Ireland will vote for the EU-Mercosur Free Trade Agreement if Brazil does not honour its environmental commitments,” he said in a statement.

Ireland would need other EU states to help form a blocking minority if it wants to kill the deal, reached in June after 20 years of negotiations.

But the Irish government is under pressure to defend its beef farmers, already suffering from Britain’s looming EU exit and low prices, by seeking to ensure Mercosur countries do not flood the market with cheaper beef.

Finland, which currently holds the EU’s rotating presidency, suggested a ban on Brazilian beef imports.

Prime Minister Antti Rinne said the fires were “a threat to our whole planet, not just to Brazil or South America”.

“We must find out whether the Europeans have something to offer Brazil to help prevent this kind of fires in the future,” he added.

Leaders of the world’s most advanced economies are also expected to discuss the matter when they meet for the G7 summit in France this weekend.

British Prime Minister Boris Johnson’s office said he would use the gathering to call for international action to protect the world’s rainforests. </s> President Donald Trump on Tuesday said his administration is working on a free-trade agreement with Brazil, to cement closer ties between the two largest economies in the western hemisphere.

[WASHINGTON] President Donald Trump on Tuesday said his administration is working on a free-trade agreement with Brazil, to cement closer ties between the two largest economies in the western hemisphere.

"We are going to work on a free-trade agreement with Brazil. Brazil is a big trading partner. Other than that, we love the relationship," Mr Trump told reporters at the White House.

Brazilian President Jair Bolsonaro is scheduled to host US Commerce Secretary Wilbur Ross in Brasilia on Wednesday.

"I have a great relationship with Brazil. I have a fantastic relationship with your president," Mr Trump said of the Brazilian leader, adding: "They call him the Trump of Brazil. I like that."

Far-right Bolsonaro is part of a populist wave that has swept the Americas and Europe in recent years, making him a kindred spirit with Trump.

With about US$70 billion in two-way annual goods exchanges between the two nations, the United States typically enjoys a robust trade surplus with Brazil.

Major US exports include agriculture goods such as wheat and animal feeds as well as information and telecommunications services.

Imports include aircraft, fuels, coffee and meat as well as iron and steel.

In 2011, the two countries signed an agreement on trade and economic cooperation to ease commercial exchanges.

But Mr Ross played down expectations for an agreement to be reached quickly.

Speaking to reporters in Sao Paulo, he also warned that a recent trade pact between the European Union and Mercosur countries - Brazil, Argentina, Paraguay and Uruguay - should not contain anything that would block a deal with the US.

Brazil's deputy economy minister Marcos Troyjo told AFP a bilateral agreement with the US would be possible if it did not involve tariffs.

Otherwise, it would be necessary to involve its Mercosur partners in the negotiations. </s> WASHINGTON, July 31 — President Donald Trump yesterday said his administration is working on a free-trade agreement with Brazil, to cement closer ties between the two largest economies in the western hemisphere.

“We are going to work on a free-trade agreement with Brazil. Brazil is a big trading partner. Other than that, we love the relationship,” Trump told reporters at the White House.

Brazilian President Jair Bolsonaro is scheduled to host US Commerce Secretary Wilbur Ross in Brasilia today.

“I have a great relationship with Brazil. I have a fantastic relationship with your president,” Trump said of the Brazilian leader, adding: “They call him the Trump of Brazil. I like that.”

Far-right Bolsonaro is part of a populist wave that has swept the Americas and Europe in recent years, making him a kindred spirit with Trump.

With about US$70 billion (RM288.7 billion) in two-way annual goods exchanges between the two nations, the United States typically enjoys a robust trade surplus with Brazil.

Major US exports include agriculture goods such as wheat and animal feeds as well as information and telecommunications services.

Imports include aircraft, fuels, coffee and meat as well as iron and steel.

In 2011, the two countries signed an agreement on trade and economic cooperation to ease commercial exchanges.

But Ross played down expectations for an agreement to be reached quickly.

Speaking to reporters in Sao Paulo, he also warned that a recent trade pact between the European Union and Mercosur countries — Brazil, Argentina, Paraguay and Uruguay — should not contain anything that would block a deal with the US.

Brazil’s deputy economy minister Marcos Troyjo told AFP a bilateral agreement with the US would be possible if it did not involve tariffs.

Otherwise, it would be necessary to involve its Mercosur partners in the negotiations. — AFP </s> U.S. Commerce Secretary Wilbur Ross arrives to a meeting with Brazil's Economy Minister Paulo Guedes (not pictured) at the Ministry of Economy building in Brasilia

BRASILIA (Reuters) - Brazil has begun negotiating a trade agreement with the United States, the South American country's economy minister said on Wednesday, kicking off knotty talks between longstanding competitors whose leaders want closer commercial ties.

Speaking in Brasilia after meeting with U.S. Commerce Secretary Wilbur Ross, Economy Minister Paulo Guedes said the United States was eager for a deal and the chance to sell Latin America's largest economy more goods, including ethanol.

Brazil and the United States compete in key areas like agriculture, making it likely the trade talks will be fraught and long-lasting. Brazil is also part of South America's Mercosur customs union, which would have to be involved in any tariff reductions.

Yet far-right President Jair Bolsonaro, along with Guedes and his team, have pledged to bring down trade barriers, open up the economy and make Brazilian business more competitive.

Since his election last year, Bolsonaro has sought to build close ties with U.S. leader Donald Trump, an ideological ally who favors bilateral commercial pacts over multilateral deals.

After meeting with Ross, Bolsonaro echoed his concerns over potential "pitfalls" in a trade deal recently struck between the European Union and the Mercosur bloc that includes Argentina, Uruguay and Paraguay.

On Tuesday, Ross said the trade deal between Mercosur and the European Union, reached in principle last month, should avoid "poison pills" that would obstruct a possible U.S. accord.

Marcos Troyjo, Brazil's deputy economy minister for foreign trade, said it would be possible to negotiate a trade accord with the United States that does not include changes to tariffs, adding that negotiations will begin with non-tariff areas.

Brazil is considering renewing in September a zero-tariff quota for 600,000 tonnes of ethanol imports per year that has been filled almost entirely by U.S. supplies, Troyjo said.

Brazil is also committed to establishing an import quota for 750,000 tonnes of U.S. wheat a year without tariffs, he said.

Ross on Tuesday reaffirmed U.S. support for Brazil to join the Paris-based Organisation for Economic Cooperation and Development, a club of the world's leading market economies. Membership in the OECD would give Brazil a seal of approval that many institutional investors need to invest in the country, Troyjo said.
Argentine Foreign Minister Jorge Faurie announces that the European Union and Argentina, Brazil, Paraguay and Uruguay achieved a breakthrough in free-trade talks after 20 years.