Commercial treaty announced on December 6, 2024, in Uruguay, has not yet been signed; current stage had been reached once in 2019, but pandemic and other differences delayed the process
The president of the government of the (European Union), Ursula Von der Leyen, announced this Friday (Dec 6, 2024) the conclusion of negotiations on the trade agreement between the bloc and the . Negotiated 25 years ago, the announcement was made at the 65th Mercosur Summit, the meeting of the bloc’s presidents, in Montevideo, Uruguay.
The free trade agreement between the 2 blocs, however, has not yet been signed. The conclusion depends on wording adjustments to the text.
The agreement must be legally reviewed and translated into all languages of the countries of the 2 blocs – 23 official languages of the European Union and the 2 official languages of Mercosur– to be approved and then signed by the 2 blocks. This stage is unlikely to be completed before June 2025.
After signing the agreement, the text will be approved by the Legislatures of the Mercosur and EU countries. The Brazilian government’s assessment is that there will be no resistance in the countries’ legislatures. But a country’s refusal will only have internal effect. It won’t affect others.
In Brazil, Congressional approval is required. In the case of the EU, approval is required from 15 of the 27 European Council countries (55%), with a total of 310 million inhabitants, that is, 65% of the bloc’s population.
There could be a minority blockade by a group of 4 countries with at least 167 million inhabitants, 35% of the EU population. France and other countries reject the agreement (understand below).
If approved, the text comes into force, producing legal effects on the 1st day of the month following the completion of internal procedures. As the agreement establishes the possibility of bilateral validity, it would be enough for the European Union and Brazil – or any other Mercosur country – to have completed the ratification process for its entry into force bilaterally between such parties.
The 27 members of the European Union have a population of almost 450 million inhabitants. The 6 Mercosur countries have almost 300 million inhabitants and together they form the 5th largest economy in the world.
Members of Mercosur:
- Brazil;
- Uruguay;
- Argentina;
- Paraguay;
- Bolivia (which is in the accession process and will not participate in the agreement).
Venezuela is also part of the bloc, but has been suspended since 2017 and has not participated in any discussion.
MUST COMBINE WITH THE FRENCH
Part of the French government and the country’s agricultural sectors vehemently reject the free trade pact between the EU and Mercosur. The agreement, negotiated since 1999, eliminates the European bloc’s tariffs on 92% of imports from the South American bloc within 10 years.
The President of France, Emmanuel Macron, was emphatic in signaling his annoyance. and violates French agricultural sovereignty.
Internally, Macron’s government is going through a moment of instability. The Prime Minister was overthrown and which also demands his resignation. Chasing the powerful French agricultural lobby is a problem Macron wants to avoid.
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.
