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EU-Mercosur Association Agreement

In “A Stronger Europe in the World”

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Background and state of play

On 28 June 2019, an agreement in principle was reached between the EU and the four founding members of the Common Market of the South (Mercosur) – Argentina, Brazil, Paraguay, and Uruguay –  on the trade pillar as part of a wider Association Agreement (AA) including political dialogue and cooperation. The latter part was agreed upon in June 2018. Following the change of government in Brazil in January 2023, the parties agreed on a roadmap for the first half of 2023 to negotiate an additional interpretative instrument as regards the commitments made under the trade and sustainable development (TSD) chapter of the trade pillar.

The FTA has a significant geopolitical relevance and is a strong sign against protectionism and unilateralism. If ratified, the FTA would establish the largest free trade zone the EU has ever created, covering a population of over 780 million, and consolidate the close political, economic and cultural ties between the two regions. Negotiations on the bi-regional AA started in 2000 based on Council negotiating directives of 1999. Currently, EU-Mercosur relations are governed by the 1995 Interregional Framework Cooperation Agreement.

The FTA would eliminate customs duties on 91% of EU goods exports to Mercosur. Mercosur would remove high import duties on industrial products from the EU such as cars, car parts, machinery, chemicals, clothing, pharmaceuticals, leather shoes, and textiles. Import duties on EU food and drink exports such as wine, chocolate, whiskey and other spirits, biscuits, canned peaches and soft drinks would be eliminated progressively. The FTA would also protect about 350 of the EU's geographical indications (GIs) on the Mercosur market. Moreover, the Mercosur countries would open their government procurement market to EU companies. The EU would remove import duties on 92% of Mercosur goods exported to the EU. For sensitive agricultural goods limited tariff rate quotas (TRQs), in-quota duties and long staging periods as well as a safeguard instrument have been incorporated. The FTA would contain a chapter on sanitary and phytosanitary measures, trade and sustainable development, bilateral safeguards, e-commerce, small and medium-sized enterprises, dispute settlement, and others.

The agreement in principle is the result of compromises and hence it presents benefits and challenges. While it has been highly welcomed by many EU industrial associations and agricultural associations of the Mercosur countries, it has also prompted significant criticism. Some EU agricultural associations have been outspoken in their negative assessment of the FTA. Civil society groups have expressed their strong opposition to the FTA arguing that it would foster large-scale deforestation and an expansion of agricultural land in the Mercosur countries, which would be incompatible with the climate change goals under the Paris Agreement and would also have serious implications for indigenous people.

In June 2020, five NGOs submitted a complaint to the European Ombudsman criticising that the external sustainability impact assessment for the trade pillar negotiations was finalised only after the agreement in principle was reached and that it does not contain up-to-date environmental data, notably on deforestation.

EU trade in goods with Mercosur picked up strongly from totalling €68 in 2020 to €88 billion in 2021. This very positive evolution, however, must be seen in the context of historically higher levels of trade in goods (2011: €91 billion). In 2021, the EU was Mercosur’s second largest trading partner after China whose trade with Mercosur stood at €141 billion according to European Commission data as of May 2022. The EU is the largest investor in Mercosur, with an investment stock of €330 billion in 2020.

Main negotiation issues

During the past 20 years of negotiations, the gap between the different positions concerning the level and pace of liberalisation of trade in agricultural and industrial goods, services and public procurement markets has been a challenge. Mercosur is a major producer of agricultural products such as beef and soybeans that already now make up a large part of Mercosur’s exports to the EU. According to a 2016 impact assessment, EU agricultural sectors would be affected to different degrees by the further opening of the EU market for Mercosur agricultural imports. Some EU offensive agricultural goods would benefit from increased market liberalisation, such as cereals as well as wine and spirits. By contrast, sensitive products for the EU such as beef, rice, poultry and sugar would come under pressure. Apart from market access for agricultural products, provisions on SPS measures and the protection of GIs have been key issues for the EU. As regards industrial sectors, notably the automotive, pharmaceutical, chemical, and textile sectors, financial and maritime services, and public procurement, EU offensive interests have contrasted with Mercosur’s defensive interests.

Position of the European Parliament

In its 2013 resolution on trade negotiations between the EU and Mercosur, the EP stressed their economic and political importance. It regretted their slow pace, deplored the protectionist measures on trade and investment taken by some Mercosur countries and reiterated the importance of including respect for democratic principles, fundamental and human rights and the rule of law, as well as environmental and social standards.

On 20 March 2023, Parliament’s Committee on International Trade (INTA) held a structural dialogue on trade issues with Executive Vice-President of the European Commission, Valdis Dombrovskis, who expressed his hope that the EU-CELAC Summit in July 2023 could be an opportunity to move forward with the agreement based on the addendum that is still under discussion. 

During the 8th legislative term José Ignacio Salafranca (EPP, Spain) was the rapporteur for the EU-Mercosur Association Agreement.

References:

Further reading:

Author: Gisela Grieger, Members' Research Service, legislative-train@europarl.europa.eu

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As of 20/04/2023.