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The European Union and the Mercosur trade pact have come a long way: after 20 years of talks, the two sides have finally agreed to phase out tariffs on most goods over the next 10 years.
The trade agreement was announced on June 28, the culmination of negotiations that stretched back as far as the days of the dot-com boom.
It opens the door for many exporters on both sides of the Atlantic, from produce and protein shippers in South America to producers of French cheese and car parts in Europe.
In addition to the dismantling of tariffs that stretch into the double-digit percentage range for some commodities, the agreement promises simplified customs procedures for goods moving between the EU and the four Mercosur partners – Argentina, Brazil, Paraguay and Uruguay.
The deal will eliminate tariffs in excess of $4.5bn a year on Mercosur imports from the EU. European exports that stand to gain the most are industrial products, cars and car parts, and wine.
Eastbound the new agreement will boost mainly perishables traffic. Argentinian exporters of blueberries hope to boost their shipments to the EU, where they currently face tariffs of 3-9%, depending on the country of destination. Uruguay looks to revive exports of mandarins, crippled by a 16% levy.
Some limitations remain, but with greater exemptions than before. The EU agreed a 99,000-tonne quota on Mercosur beef at a 7.5% tariff, phased in over five years. It also gave the nod to 180,000-tonne annual quotas each for tariff-free imports of sugar and poultry.
Export organisations and political leaders in Mercosur welcomed the agreement. Brazil’s president, Jair Bolsonaro, hailed it as a historic deal, “one of the most important trade agreements of all time”.
In the context of tense trade relations, it has also been described as a signal against protectionism. In a news conference, EU trade commissioner Cecilia Malmstrom said it sent “a loud and clear message” in support of open trade.
However, a chorus of voices within the EU are expressing different views, from scepticism to outright hostility.
The Citrus Management Committee of Spain has criticised the “opacity” of the negotiations and warned that free trade would hurt the Spanish industry, and several EU countries, including France, fear a surge cheap beef flooding their markets. Italian agriculture minister Gian Marco Centinaio likened the agreement to “a gun aimed at the head” of Italy’s farming industry.
A large supermarket chain in Austria has called on the government in Vienna to block the agreement. Arguing that agriculture in the Mercosur countries was characterised by excessive use of pesticides and genetically modified products, it warned that the deal would undermine food standards in Austria, with dire repercussions for consumers and the local farming industry. In addition, it claimed, the growth of agriculture in Mercosur went hand in hand with the alarming destruction of tropical rainforest.
The EC felt compelled to mount a counterattack against what it called “misinformation and misplaced facts”, insisting that strict EU norms on food standards would be upheld. Agriculture commissioner Phil Hogan promised there would be no product entering from Mercosur countries which did not comply with existing EU food safety standards.
Despite this, the Irish parliament has dismissed the agreement in a largely symbolic vote, urging the government to reject it.
The deal has to be ratified by all national governments, a process that is expected to take over a year.
In light of the long ratification process and vocal opposition in EU countries, logistics providers have no plans to ramp up their capacity between the two regions.
A spokesperson for Deutsche Post DHL Group said: “As the trade agreement between Mercosur and the EU hasn’t been approved by the European Parliament and European Council yet, it would be highly speculative to discuss the impact and benefits of this free trade deal.” Other companies have responded similarly.
While they await the outcome of the ratification marathon on the other side of the Atlantic, Mercosur’s leaders are looking to open other doors for trade. Shortly after announcement of the deal with the EU, Argentina’s president, Mauricio Macri, revealed that his government was holding talks with the Brazilian administration about a potential free trade deal with Washington.
Members of his government also confirmed that a deal with Canada could be signed before the end of the year, and agreements with South Korea and Singapore could be reached in the near future.