Text will include mechanisms to deal with negative impacts of measures that may affect exports from the South American group
The Mdic (Ministry of Development, Industry, Commerce and Services) stated this Friday (Dec 6, 2024) that the texts of the trade agreement between Mercosur and the EU (European Union) “will be announced in the coming days”. Here is the statement (PDF – 222 kB).
Negotiations will also be concluded this Friday (Dec 6), during the Mercosur summit in Montevideo (Uruguay). In the statement, the president’s government (PT) celebrated. He stated that the agreement is the “largest ever completed” by the South American group.
“Under the guidance of President Lula, the text of the agreement announced today [6.dez] ensures the preservation of space for public policies in commitments on government purchases, trade in the automotive sector and export of critical minerals”said the Doctor.
According to the ministry, the deal will also result in the following benefits:
- creation of one of the largest free trade areas in the world: “Mercosur and the European Union bring together around 718 million people and economies that, together, reach approximately US$22 trillion”;
- new trade and investment opportunities: the agreement allows greater insertion of Mercosur economies in foreign markets, especially in strategic sectors. The Doctor states that this benefit will be “without compromising the capacity to implement public policies in crucial areas such as health, industrial development and innovation”;
- protection mechanisms for Mercosur: the agreement includes provisions to deal with possible negative impacts of unilateral measures that may affect exports from the South American bloc.
The agreement had been negotiated since 1999. In 2019, during the government of (PL), Mercosur and the EU (European Union) the agreement was ready, but the covid-19 pandemic came and the signature was missing. Disagreements began to emerge and negotiations needed to be resumed.
NEXT STEPS
Despite the end of discussions, the agreement will not come into force immediately. It is still necessary to resolve legal details in order to reach the final text that will be signed. This is not expected to be ready before the beginning of 2025.
After signature, the text will pass through the European Council and the European Parliament.
The EU body is made up of representatives from the governments of the 27 countries that make up the bloc. 15 countries (qualified majority) are needed for the agreement to be approved.
If it passes the European Council, the agreement will go to the European Parliament. It will need to receive a simple majority (50% + 1) of votes present to be approved. The legislative house has 720 deputies.
The assessment of Mercosur diplomats is that the chances of approval would be favorable to the agreement in the Council. But opposing European Union countries could impose a minority blockade.
4 countries with 35% of the bloc’s total population are needed for this. If the text is not approved by the Council, it is likely that it will not reach the European Parliament for a vote.
FRANCE LEADS OPPOSITION
France leads the group opposing the agreement. Poland, the Netherlands and Austria tend to follow. This would form the number of countries needed for the blockade, but would be insufficient in population.
There are chances that Italy will also participate. In this case, the criterion of 35% of EU inhabitants is met even if the Netherlands or Austria do not participate in the group.
European diplomats estimate that it will not be easy to form the blockade, although the lobby against the agreement is strong. French farmers opposition to the initiative and pressure the country’s government for fear that opening the market will harm local products.
There are doubts, however, whether the French government will be able to block the agreement. The country faces a political crisis after Prime Minister Michel Barnier took office on Wednesday (Dec 4) and must focus on internal problems for now.
Furthermore, there are people in favor of the agreement in several countries, especially in industrial companies. The assessment of diplomats is that this other side, despite being silent, has a chance of making interest in ratification predominate. It would prevent Italy, for example, from participating in the minority blockade. Von der Leyen on Thursday that the agreement “It will be the largest trade and investment partnership the world has ever seen“.
One argument in favor of the agreement is that there is a risk that some European countries will face low growth and even recession in the coming years. The solution to this would be to expand trade with other countries. Mercosur is a relevant market.
WHAT CHANGES WITH THE AGREEMENT
The European Union will eliminate tariffs on 92% of imports from the South American bloc within 10 years.
Mercosur, in turn, will end 72% of tariffs on products purchased from the European bloc in the same period. The exemption will reach 91% in 15 years.
For the agricultural sector, 81.8% of what the European Union imports from Mercosur will have zero tariffs in 10 years. In the same period, 67.4% of what the South American bloc purchases will be tariff-free.
The agreement includes quotas for certain products to prevent too large an increase in sales of certain products. Among these quotas are:
- chicken – 180 thousand more tons per year;
- sugar – 180 thousand tons;
- ethanol – 450 thousand tons for industrial use and 200 thousand tons for general use;
- beef – 99 thousand tons.
There will also be relaxation of the so-called rule of origin. This will allow products sold within the agreement to have a greater volume of components imported from other countries.
In the industrial area, the European Union will eliminate tariffs on all imports from Mercosur within 10 years. In the same period, 72% of industrial products exported by the EU to the South American bloc will have their taxes reduced. The percentage rises to 90.8% in 15 years.
