Following a massive 20 years of negotiations, a huge trade deal has been struck between the European Union and the South American economic bloc Mercosur.
This was the largest trade deal ever for the EU, said the block’s Commission chief Jean-Claude Juncker and added that the two parties have shown that “we stand for rules-based trade” amidst an environment of trade tensions between the United States and China.
It was “historic” and “one of the most important trade deals of all time”, said Brazil’s President Jair Bolsonaro.
Argentina, Brazil, Uruguay and Paraguay make up Mercosur. Another member of the block is Venezuela which was suspended in 2016 as it had failed to meet basic standards of the group.
The crux of the deal is to reduce or completely remove tariffs on trade which would reduce the price of products for consumers and increasing exports at the same time for companies on both sides. This deal is the largest in the world in terms of population as it would create a combined market that would have a total population of almost 800 million consumers.
The negotiations for the deal started way back in 1999. The talks accelerated after the election of Donald Trump as the US president in 2016 – following which talks between the EU and the US stalled.
Since the election of Trump, agreements on trade have been secured by the EU with Canada, Mexico and Japan.
But EU trade commissioner Cecilia Malmstrom said that savings on tariffs from the EU deal with Mercosur deal would be four times as large as those made in the Japan deal.
Analysts said that at a time when free trade is under attack globally, achieving a free trade agreement that was as complicated as this one was quite tough. The manner of doing business with countries like Brazil – which has one of the most closed economies of the world, would undergo significant change. Traditionally, European companies have been placed at a disadvantage because of high tariffs in comparison to local Brazilian companies and its national industries. On the other hand, the European food market would be opened up for South American farmers.
The deal had to be concluded under pressure of time because of elections in Argentina later this year and an unfavorable result could have significantly changed the country’s stance towards free trade.
“They have been long negotiations – tough, difficult, and at least I have said many times ‘we are almost there’. Now we are. This is a landmark agreement,” Malmstrom said. The deal sent clear signals that both the EU and Mercosur were in favour of “open, sustainable and rules-based trade”, she said.
Till now Mercosur had been a “very closed commercial space”, but the trade agreement with the EU sent a “very clear message about where we are going”, said Argentine Foreign Minister Jorge Faurie while talking to reporters after the deal.
The deal would boost GDP, create jobs and attract investment, said Argentina’s Secretary of International Relations Horacio Reyser.
(Adapted from BBC.com)