European Union agrees trade deal with South American bloc after 20 years of negotiations

Efforts to reach agreement intensified after Donald Trump's presidential victory

Samuel Osborne
Saturday 29 June 2019 07:47 BST
EU strikes deal with Mercosur - grouping of Argentina, Brazil, Paraguay and Uruguay
EU strikes deal with Mercosur - grouping of Argentina, Brazil, Paraguay and Uruguay

The European Union and South American bloc Mercosur have struck a trade deal after two decades of negotiations.

The two blocs intensified efforts to reach an agreement after Donald Trump’s presidential victory prompted the EU to halt talks with the United States and look for alternative trading allies.

That push has seen it implement a free trade agreement with Canada and reach agreements with Japan and Mexico and now, after 39 rounds of talks, also a provisional deal with Mercosur – the grouping of Argentina, Brazil, Paraguay and Uruguay.

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

In terms of tariff reduction, it could be the EU’s most lucrative trade deal to date, with the savings potentially four times greater than for deals with Canada and Japan combined.

The agreement was clinched in the Belgian capital of Brussels is ”an ambitious, balanced and comprehensive agreement” that sends a strong positive signal amid global trade tensions, according to an EU statement.

Jean-Claude Juncker, the president of the European Commission, described the pact with the group as “a historical moment.”

“In the midst of international trade tensions, we are sending today a strong signal with our Mercosur partners that we stand for rules-based trade,” Mr Juncker said.

Argentina’s Foreign Ministry said the agreement “will mean the integration of a market of some 800 million people, nearly a fourth of the world’s gross domestic product and more than $100bn in bilateral trade of goods and services.”

The ministry said the deal also is aimed at strengthening political and cultural ties with the EU, improving access to goods, services and investments by reducing restrictions and easing access to technology and raw materials.

Europe has its eyes on increasing access for its companies making industrial products, notably cars for which tariffs are 35 per cent, and to allow them to compete for public tenders.

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

Brazil said the agreement would eliminate import tariffs for several farm products, including orange juice, instant coffee and fruit and give greater access through quotas for meat, sugar and ethanol, boosting the economy and increasing investment in the country for the next 15 years.

Jair Bolsonaro, Brazil’s president, tweeted that the deal was historic and one of the most important trade agreements of all time.

To date, EU nerves about a surge of beef imports and Mercosur hesitation about opening up some industrial sectors, such as cars, have meant past deadlines have come and gone.

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The agreement still faces a potentially difficult road to approval: France and other countries fear the impact of a sharp hike in beef imports, while environmental groups, whose influence is stronger in the new European Parliament, argue the agreement could exacerbate deforestation.

EU countries and the European Parliament both need to give their backing for the agreement to enter force.

Additional reporting by agencies

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