EU’s largest trade agreement ever concluded on 28 June 2019: the EU and the Mercosur brought to fruition the long-standing negotiations on a comprehensive trade agreement between the EU and the Mercosur (the “Association Agreement”). The Mercosur is an economic block covering Argentina, Brazil, Paraguay and Uruguay.
The largest treaty of its kind for the EU and the first one for the Mercosur
The Association Agreement is the largest trade agreement concluded by the EU and will mean savings of more than EUR 4 billion in custom duties per year for EU companies. It was finalized after 20 years negotiations and it is the first major trade agreement signed by the Mercosur.
The Association Agreement will create a market for goods and services of 800 million persons, covering 32 countries and one fourth of the total global GDP. By way of comparison, the current bilateral trade totals EUR 88 billion per year for goods and EUR 34 billion for services. It is expected that trade will increase substantially as a result of the Association Agreement.
Furthermore, the Association Agreement opens — for the first time — the public procurement market in the Mercosur countries to EU companies.
The key aspects of the Association Agreement
Once the Association Agreement is fully implemented, the trade agreement will eliminate customs duties currently applying to more than 90% of the goods exported to the Mercosur by EU companies. These include goods in the industrial, agriculture and food sectors. The Association Agreement will provide EU companies with the opportunities to export products in sectors that are currently subject to high custom tariffs including – among others – automotive, machinery, pharmaceutical and chemical sectors. The Association Agreement will also simplify the export of goods and services from the EU to one market with a high growth potential.
The Association Agreement covers the following areas: a) food safety, animal and plant health; b) environmental protection and labor conditions (including the implementation of the Paris Climate Agreement), c) services; d) E-commerce; e) government procurement f) intellectual property rights and trade secrets, g) Geographical Indicators for certain distinctive products of the EU (including for example the “Tiroler Speck”) and the Mercosur; h) technical regulations and standards; i) eases access to raw materials and parts; j) small and medium size companies (facilitating access to relevant information for export of goods and services); k) transparency; and l) the involvement of the civil society.
Significantly, the Association Agreement also provides for a dispute resolution mechanism regarding its interpretation and application. Among other aspects, it provides open hearings, the publication of decisions, and participation of interested parties. KNOETZL, of course, will continue to lead in monitoring developments, opportunities, procedures and the effectiveness of these provisions, and all related aspects, as they come on line.
The next steps for the EU and the Mercosur leading to its implementation
The next steps for the EU are finalizing the revision of the final agreed text of the Association Agreement, translation into all official languages and submission of the Association Agreement to the EU Members States and the European Parliament for approval. The members of the Mercosur will also submit the final text of the Association Agreement for approval of their respective Parliaments.