EU and Mercosur agree huge trade deal after 20-year talks




The EU and South American economic bloc Mercosur have clinched a huge trade deal after 20 years of negotiations.

EU Commission chief Jean-Claude Juncker said it was the EU’s biggest deal to date and, at a time of trade tensions between the US and China, showed that “we stand for rules-based trade”.

Brazil’s President Jair Bolsonaro said it was “historic” and “one of the most important trade deals of all time”.

Mercosur consists of Argentina, Brazil, Uruguay and Paraguay.

Venezuela is also a member but it was suspended in 2016 for failing to meet the group’s basic standards.

The deal aims to cut or remove trade tariffs, making imported products cheaper for consumers while also boosting exports for companies on both sides.

It is set to create a market for goods and services covering nearly 800 million consumers, making it the largest in the world in terms of population.

The two parties began negotiating in 1999 but talks accelerated after US President Donald Trump’s election in 2016. As a result EU-US talks were frozen.

The EU has also concluded trade agreements with Canada, Mexico and Japan since Mr Trump’s election.

However, the EU deal with Mercosur could see savings on tariffs that are four times as big as those made in the Japan deal, EU trade commissioner Cecilia Malmstrom said.

Narrow window to close the deal

Analysis by Daniel Gallas, South America business correspondent

It is no small feat to close such a complicated deal at a time when free trade is under attack globally. Protectionism is clearly on the rise – with Brexit and the trade war between China and the US.

The deal could significantly change the way Europeans do business in countries like Brazil – which has one of the world’s most closed economies. High tariffs have historically kept European competitors at a disadvantage against national industries.

Similarly, South American farmers will finally gain access to European food markets.

Europeans and South Americans had a narrow window to close this deal, as elections in Argentina later this year could potentially shift the mood against free trade, as is happening in other parts of the world.

Presentational grey line

What is the reaction?

Ms Malmstrom said negotiations had begun 20 years ago to the day.

“They have been long negotiations – tough, difficult, and at least I have said many times ‘we are almost there’. Now we are. This is a landmark agreement,” Ms Malmstrom said.

She said it sent a strong message that both the EU and Mercosur were in favour of “open, sustainable and rules-based trade”.

Speaking to reporters, Argentine Foreign Minister Jorge Faurie said Mercosur had hitherto been a “very closed commercial space” but that the deal with the EU sent a “very clear message about where we are going”.

Argentina’s Secretary of International Relations Horacio Reyser said it would boost GDP, create jobs and attract investment.

He tweeted a video of the moment the deal was confirmed.

However, the environmental group Greenpeace said the deal – and the likely growth in demand for Latin American agricultural products – amounted to a “disaster for the environment on both sides of the Atlantic”.

Ahead of the deal’s announcement, it said the agreement would lead to more destruction of the Amazon rainforest and attacks on indigenous peoples.

Cattle farming is already the biggest driver of deforestation, Greenpeace says.

Critics say Mr Bolsonaro’s plans to weaken environmental protections also threaten the Amazon.

What’s in the deal?

The EU is already Mercosur’s biggest trade and investment partner and its second largest for trade in goods, Reuters reports.

The EU wants to increase access for firms that make industrial products and cars – which are currently subject to tariffs of up to 35% – and also enable them to compete for public contracts in Mercosur countries.

Mercosur wants to increase exports of beef, sugar, poultry and other farm products.

In a statement, Brazil said the deal included eliminating tariffs on products such as orange juice, instant coffee and fruit.

Meanwhile, producers of other products such as meat, sugar and ethanol would have greater access to the EU market through quotas, the statement said.

How other complex deals compare

  • China joining the WTO: Shortly behind the lengthy Mercosur negotiations is the agreement for China to join the World Trade Organisation. After 15 years of diplomatic struggle, China became a fully-fledged member in 2001 amid commitments to overhaul its economy
  • The Louisiana Purchase: In April 1803, the US agreed to buy 830,000 square miles of land from French control – a deal that would double the country’s size. Negotiations took only a few weeks and US representatives even managed to haggle Napoleon’s $22m price-tag down to $15m
  • Brexit: While nowhere near the 20-year mark yet, the complex negotiations surrounding how the UK will untangle itself from the European Union are more than three years down the line (and counting…)
  • Greece v Macedonia: One deal that took longer to sort was a naming dispute between these two neighbours. Greece has a region called Macedonia and objected to their neighbours name since it was announced. After 27 years, a compromise involving a name-change to the Republic of North Macedonia ended the row earlier this year
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