South America’s Mercosur bloc struck a free-trade deal with the European Union on Friday after two decades of negotiations that concluded amid high global trade tensions and rising protectionism.
The agreement announced by both sides came as U.S.-EU trade talks have stalled with the Trump administration threatening to impose tariffs on all autos, a major European export to the United States.
“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,” European Commission President Jean-Claude Juncker said, following the clinching of the deal in the Belgian capital of Brussels.
Juncker described the pact with the bloc made up of Argentina, Brazil, Paraguay and Uruguay as “an historic moment” that came exactly 20 years after talks were launched.
It shows that the European bloc is determined to remain a flag-bearer of the global trade system at a time when that system is being challenged by a Trump administration skeptical of free trade.
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 $100 billion 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.
Deal particularly important for industrial sectors
Juncker said the deal would remove most tariffs on EU exports to Mercosur, saving more than 4 billion euros ($5.98 billion Cdn) worth of duties each year, four times as much as Europe’s pact with Japan.
The commission, which negotiates trade deals on behalf of the 28-nation EU, said the agreement is particularly important for industrial sectors like cars and car parts, machinery, chemicals, pharmaceuticals, as well as clothing and footwear. Mercosur hopes to benefit with more exports of agricultural products including beef, poultry and sugar.
The EU’s farm and food sector also stands to gain, particularly products like chocolates, wine and spirits.
The commission said the deal, which still must be ratified by the legislatures of all the countries involved, will also ease border checks and cut red tape.
The agreement brings to 15 the number of pacts the EU has concluded since 2014, most recently with Canada and Japan, and comes as the bloc pushes ahead with international trade deals.
Brazilian President Jair Bolsonaro called it one “of the most important trade agreements of all times.”
The Brazilian government said the deal would boost Latin America’s largest economy by slashing tariffs for some agricultural products like orange juice, fruit and instant coffee, and expanding access via quotas for beef, ethanol and sugar.
This is a landmark agreement. – Cecilia Malmstrom, EU trade commissioner
“Brazilian companies will benefit from the elimination of tariffs on exports of 100 per cent of industrial products. That will equalize the conditions of competition with other partners that already have free trade agreements with the EU,” it said.
Negotiations began on June 28, 1999, but have taken a long and torturous path marked by breaks and frustrations, as the countries’ different sensitivities and priorities were taken into account.
But EU Trade Commissioner Cecilia Malmstrom said the talks gathered momentum early this year, aided in part by a new Brazilian government that made the deal one of its priorities, and were pushed over the line by intensive negotiations over the last three days in Brussels.
“This is a landmark agreement,” a beaming Malmstrom told reporters in Brussels, flanked by negotiators and senior officials.
“With this deal we are showing that we believe that trade is a good thing. It brings people and companies together, and we send a loud and clear message in support of open, sustainable, mutually beneficial, rule-based trade.”