Guest post from Bergstein Law of Uruguay
On June 28, 2019 the European Union and the MERCOSUR group − comprised of Argentina, Brazil, Paraguay and Uruguay − reached a mutual understanding over a trade agreement. Both sides have been negotiating such an agreement for 20 years. European Commission President Jean-Claude Juncker calls this the largest trade agreement the European Union has ever concluded.
According to a European Commission memorandum, current trade between the EU and MEROCUR nations totals €88 billion a year for goods and €34 billion for services. The EU exports to MERCOSUR goods worth €45 billion a year and imports MERCOSUR products of nearly the same value (€43 billion). When it comes to services, the EU exports more than twice as much as it imports: €23 billion of services supplied by EU firms to clients in MERCOSUR versus €11 billion in services delivered to EU clients by firms from MERCOSUR countries.
It is expected that, over time, the agreement will remove duties on 91 percent of the goods that EU companies export to MERCOSUR. For example, MERCOSUR countries would remove high duties on industrial products, such as cars, car parts, machinery, chemicals, clothing pharmaceuticals, leather shoes, and textiles. Also, the agreement would progressively eliminate duties on EU food and drink exports, such as wine, chocolate, whiskey and other spirits, biscuits, canned peaches, and soft drinks. The agreement is scheduled to reduce or eliminate certain duties which MERCOSUR currently imposes on exports of raw materials, such as hides, skins and soybean products.
The agreement would eliminate import duties on 92 percent of MERCOSUR goods exported to the EU, including a number of farm products, such as coffee and fruit. It will also give greater access through quotas for beef, poultry, sugar and ethanol.
The agreement includes a bilateral safeguard mechanism. It allows the EU and MERCOSUR to impose temporary measures to regulate imports in the event of an unexpected and significant increase in imports, which could cause (or threaten to cause) serious injury to domestic industry. Such safeguards would also apply to agricultural goods.
The agreement will include specific regulatory provisions for certain sectors of services, such as postal and courier services, telecommunications and financial services. The agreement will also contain provisions on the movement of professionals for business purposes, such as managers or specialists whom EU companies may allocate to their subsidiaries in MERCOSUR countries.
Under the agreement, MERCOSUR will protect 357 European geographical indications for wines, spirits, beers and food products (such as Prosciutto di Parma, Champagne, Port wine, and Irish whiskey). The EU will also protect the names of traditional MERCOSUR products such as Cachaça (a Brazilian distilled spirit) or Mendoza wine from Argentina.
The agreement will require both sides to provide information on market access for small and medium-sized enterprises (SMEs) on a specific website and will create a coordinator on each side to cooperate in identifying ways for those companies to benefit from opportunities to be offered by the agreement.
Based on the initial agreement, next, both sides will conduct a legal review and produce a final version of the trade agreement. Thereafter, the European Commission will translate the text into all EU official languages and submit the agreement for approval by the European Parliament and Council. Naturally, MERCOSUR countries also need to give their backing for the agreement to enter into force.
Meanwhile, Brazilian Foreign Minister Ernesto Araujo said he believes two additional significant trade deals could be reached in the next six months, The EU-MERCOSUR agreement, he said, has increased the interest of other global trading partners.
The trade agreement is part of a more comprehensive association agreement still under negotiation between the two sides. Such an association agreement contains a trade pillar as well as political and cooperation pillars, on which negotiators already reached a general agreement in Montevideo in June 2018.