The EU has thus become the first major partner to conclude a trade agreement with Mercosur (Argentina, Brazil, Paraguay and Uruguay). This historical agreement marks the end of more than 30 years of preparatory work. The agreement gives Member States access to a market of more than 780 million professionals and consumers.
In customs matters, the agreement provides the gradual elimination of 91% of customs duties over a period of 10 to 15 years. These cuts affect prohibitive customs duties of EU exports to Mercosur in key sectors such as: cars ; car parts ; machines ; chemical products ; pharmaceutical products ; clothes and shoes.
In addition, the EU agri-food industry is also strongly impacted by this agreement, as significant reductions in tariffs are foreseen on: wines ; spirits ; soft drinks ; chocolates and confectionery.
All of these cuts will allow the EU to save approximately 4 billion euros annually in customs duties.
On the other hand, Mercosur will benefit from the increase of numerous quotas, such as:
- 99,000 tonnes of beef per year at a preferential rate of 7.5% ;
- an additional 180,000 tonnes on sugar ;
- an additional 100,000 tonnes of poultry
The otherwise controversial agreement includes a safeguard mechanism.
It provides for flexible rules of origin that will allow products from the EU and Mercosur member states to benefit from preferential tariff treatment. In addition, a rule of bilateral cumulation is introduced and will be applicable if the operation carried out in the last country party to the agreement goes beyond an insufficient transformation.
The agreement also provides for a high level of protection for more than 350 European products recognized as geographical indications, as well as compliance with European sanitary and phytosanitary standards.
In addition, it mentions the enforcement of the Paris Agreement on Climate – a first – fighting in particular against the deforestation in Brazil, and the sustainability of trade and sustainable development.
This agreement in principle will be subject to a legal revision before being sent to the EU Member States and the European Parliament for approval.
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This is an opportunity for companies on both sides of the Atlantic. The Latin America Desk and the DS Customs & Trade team are at the disposal of its clients interested in these markets to measure the impact without waiting for the entry into force of the agreement.
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