Since 1999, Mercosur and the European Union (EU) have worked on building a free trade agreement between the two blocs.
This Thursday (5), President Luiz Inácio Lula da Silva (PT) stated that, after assuming the rotating presidency of Mercosur, he will not leave the position.
In December 2024, in Montevideo, capital of Uruguay, which hosted the bloc’s Summit of Heads of State.
The conclusion of the negotiations was attended by .
In a joint statement, the two blocs highlighted the “intense negotiation process to adjust the agreement to the current challenges faced at national, regional and global levels”. The full document can be viewed.
But after all, what is a free trade agreement and why is this specific one so debated?
Free trade agreements are bilateral treaties signed between blocs and/or countries to open the door to business between the parties.
Rules of origin, trade in services, government procurement, intellectual property, technical barriers, trade defense and other topics that these agreements address and seek to facilitate.
This modality is broader than trade preference agreements, which promote this openness in the trade of goods to a lesser extent, without establishing minimum or maximum trade limits.
A study by the Institute of Applied Economic Research (Ipea) points out that the signing of the agreement could generate a 0.46% increase in the Brazilian economy between 2024 and 2040, in addition to a 1.49% growth in investments.
And what is the free trade agreement with the EU?
During the Latin America, Caribbean and EU Summit, held in Rio de Janeiro, between June and July 1999, negotiations between Mercosur and the European bloc were launched. At the beginning, the assessment was that the negotiations would be long and difficult.
Initially, the interest was in the complementarity that the parties had to offer each other: while Mercosur has strong opportunities in agribusiness — mainly due to Brazil —, the EU has a more robust industry — led by Germany.
“The agreement begins to be designed in the era of the beginning of globalization. But the world and both sides have evolved, new needs and difficulties arise in making the agreement work”, points out Leonardo Trevisan, professor of international relations at ESPM.
As the years passed,
“For Germany, it’s a lifeline. An aging industry like Germany looks at the Brazilian market and looks for customers,” says Trevisan.
“The agreement will go ahead because European industry needs to save a market here, it looks at the competition and investment capacity of the United States and China, and realizes that it will not be there to compete with these markets in the long term.”
Meanwhile, French agribusiness made Europe its main client, but did not evolve enough to compare with Brazilian agribusiness.
“Our agriculture is strong and is capable of entering Europe heavily. The biggest problem is not Brazilian agriculture entering France, it is the size of our food industry, which is more efficient, ending up stealing the French market”, concludes the ESPM professor.
And it is because of the complexity of the subject that the debate lasted 25 years. Now, at the Summit of Mercosur Heads of State, .
Below, check out the topics covered by the agreement.
Trade of Goods
The goods chapter establishes free trade between Mercosur and the European Union, based on commitments between the parties on trade in goods.
Topics such as national treatment, taxes and other charges on imports and exports, import and export licensing procedures, taxes on exports, state-owned companies, repaired goods and others are addressed to establish the basis of the agreement.
92% of products originating in Mercosur and 95% of tariff lines must be free from taxation in the EU, according to the preferences set out in the goods chapter. For comparative purposes, without the agreement, only 24% of exports arriving in Europe are tariff-free.
On the part of Mercosur, the forecast is to release 91% of imports originating in the EU from charges.
The EU will eliminate 100% of its industrial tariffs within ten years, while Mercosur will cut 91% in terms of tariff and trade lines within 15 years.
In agribusiness, the EU will give Mercosur preferential access to practically all its agricultural products and 97% of tariff lines, while the members of the South American bloc will give Europeans access to 98% of trade and 96% of tariff lines.
Rules of Origin
The objective of this topic is to ensure that economic agents on both sides of the agreement are the beneficiaries of the negotiated preferences.
In this way, diplomats sought to agree mechanisms to prevent and combat irregularities and fraud related to obtaining preferential tariff treatment, seeking to request specific origin requirements for the entire tariff universe.
Trade Facilitation
In order to maximize the benefits of the agreement, the topic addresses issues related to:
- Transparency;
- Cooperation between customs authorities;
- Dispatch of perishable goods;
- Early decisions;
- Customs transit;
- Authorized economic operators (OAS);
- Single windows;
- Use of technologies in customs clearance;
- Temporary admission;
- Risk management.
Small and Medium Businesses
The parties also sought to align specific mechanisms to assist micro, small and medium-sized enterprises (MSMEs).
The measures provide for the exchange of information and the creation of MSME coordinators, whose objective will be to develop and implement a work program aimed at supporting the internationalization efforts of small businesses.
Services
In this sense, measures were proposed to serve agents linked to the four modes of service provision: cross-border trade, consumption abroad, commercial presence and temporary movement of individuals.
The objective of these negotiations is to avoid discrimination against foreign service providers and investors in favor of national ones, in addition to increasing transparency and legal security for service providers and investors to conduct business.
Government Procurement
The objective of standardizing rulings in this sense is to ensure greater competition and access in domestic public tenders, as well as the incorporation of international standards in the area of transparency.
The EU-Mercosur agreement must ensure that suppliers of goods and services will be treated as if they were domestic.
Intellectual Property
In this chapter, the agreement reinforces international standards in the areas of patents, trademarks, industrial design and copyright.
What is new is that the treaty proposes mutual recognition of geographical indications, with an adequate period of time to readapt domestic production.
State Companies
The measures do not create impediments. Otherwise, the agreement recognizes the special nature of these companies and seeks to ensure that SOEs act based on commercial considerations, allowing them to depart from this premise whenever necessary to fulfill their respective mandates.
Dispute Resolution
The provision provides measures to assist parties in resolving commercial disputes, while still preserving the right to appeal to the mechanisms of the World Trade Organization (WTO).
Trade and Sustainable Development
The topic reinforces the parties’ commitment to the proposals of the United Nations Framework Convention on Climate Change and the Paris Agreement.
Technical Barriers to Trade
The chapter provides for other measures that promote trade facilitation initiatives.
In this topic, mechanisms are foreseen to promote transparency — including encouraging regulatory impact analysis and public consultations —, labeling and cooperation and technical assistance between the parties.
Automotive
The annex in question provides for the acceptance of test reports for requirements set out in domestic legislation with reference to or full incorporation of United Nations (UN) standards.
Trade Defense and Bilateral Safeguards
In order to ensure the regulation and protection of the parties, the agreement also covers anti-dumping, compensatory and global safeguards measures.
This topic provides mechanisms to promote transparency in investigations and informal consultations, especially in multilateral cases, and there are also provisions on the rule of lesser rights, price commitments and end-of-period reviews.
