The EU-Mercosur Trade Accord Sends a Signal to the World’s Protectionists



Anabel González | Peterson Institute for International Economics

After nearly 20 years of negotiations, the European Union (EU) and the four founding members of the customs union Mercosur (Argentina, Brazil, Paraguay, and Uruguay) have reached an agreement to lower trade barriers, sending a signal to the world’s protectionists that increased economic cooperation and integration can benefit all sides. The accord underscores the EU’s willingness to make trade concessions at a time when the United States is threatening to get into a trade war. The four Mercosur countries are betting that they too can benefit from increased trade cooperation. The accord is thus an important accomplishment for both parties.

Following some 40 negotiating rounds, the two sides agreed to strong trade disciplines and made market access concessions. The EU will liberalize 95 percent of products, covering 92 percent of its imports from Mercosur. Mercosur will fully liberalize 91 percent of products, covering 91 of imports from the EU (see table 1). In both cases, transition periods of up to 10 years will apply, with longer time periods for more sensitive goods. For products not fully liberalized, additional market access will be provided through tariff-rate quotas. Important concessions for Mercosur countries include the elimination of tariffs on goods like orange juice, instant coffee, and fruits and increased and/or improved access via tariff-rate quotas for beef, poultry, pig meat, sugar, ethanol, and other products. The EU will get greater access in the four South American countries for manufactured goods, some of which face high tariffs, such as cars and parts (35 percent), machinery (14 to 20 percent), and chemicals (18 percent), and also for European agricultural products like dairy (28 percent) and wines (27 percent). The EU expects this trade deal to be its most lucrative to date, with about €4 billion saved in tariffs. Firms will also enjoy improved access to services and government procurement markets in both blocs. In all cases, effective implementation will be critical for the agreement to deliver on its promise.

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