Mercosur and the European Union sign historic free trade agreement after 25 years of negotiations

After more than two decades of negotiations, the member countries of Mercosur and the European Union sealed a historic agreement on Friday that will allow the creation of one of the largest free trade zones in the world.

The signing took place in Montevideo, during the summit of the South American bloc, made up of Argentina, Brazil, Paraguay, Uruguay and Bolivia, after an initial draft presented in 2019 caused differences on environmental, economic and political issues that delayed its final approval, with France among the main detractors.

“We stand together on a global stage as partners… it means more jobs and good jobs, more choices and better prices,” he said the president of the European Commission, Ursula von der Leyen in a press conference after the signing, in which the leaders of Argentina, Javier Milei, of Uruguay, Luis Lacalle Pou, participated; from Brazil, Luiz Inácio Lula da Silva; and from Paraguay, Santiago Peña.

Von der Leyen added that “Mercosur will bring significant benefits to consumers and companies on both sides, it will facilitate European investment… this will bring great business opportunities.”

Despite the consensus reached in the Uruguayan capital, the controversial pact will only come into force after being ratified by the 27 member states of the European Union, as well as by the European Parliament and the national assemblies of the countries involved.

If finalized, the agreement between the EU and Mercosur would create one of the largest free trade areas in the world, covering more than 700 million people and 25% of the world’s Gross Domestic Product.

After the signing, French Trade Minister Sophie Primas reaffirmed France’s opposition, stating that the agreement only binds the European Commission, not the member states.

Primas has vowed to resist the next stages, citing concerns about environmental and agricultural effects, in a stance that highlights the hurdles the pact faces in gaining EU-wide approval.

Long negotiations and potential profits

Negotiations between the blocs began in 1999, although it was only 20 years later when an initial agreement was announced, which was never ratified.

Throughout the talks, France – which has the largest agricultural industry in Europe – has been the main opponent of the agreement, a position that has been supported by other countries such as Poland, Austria and the Netherlands.

On the opposite side, the main promoters of the treaty include Spain, Italy, Portugal and especially Germany, which sees South America as a key market for its automotive sector.

If ratified, the EU-Mercosur agreement would mean the reduction of tariffs and trade barriers between the blocs and would make it easier for companies on both sides to export goods.

For Europeans it would mean lower tariffs on products such as cars, machinery and chemicals, while South American countries would have privileged access to EU markets for their agricultural exports, such as sugar and beef and poultry. corral, since they would be able to eliminate tariffs on exportable products by 70%.

Despite the benefits, some countries that have witnessed the decades of ups and downs of the trade agreement are not celebrating yet, as the road to its eventual entry into force is still long.

“Anyone with even a little memory is skeptical. It seems like we’ve been through this before. They have introduced leaders, they have declared victory and they have celebrated, and yet there always seems to be a problem,” said Brian Winter, vice president of the New York-based Americas Society/Council of the Americas.

In this framework, the Foreign Minister of Uruguay, Omar Paganini, recognized that the effective implementation of the agreement and its benefits still depend on several stages, such as the review of different organizations and the individual ratification of the countries.

“It is a process that takes, it takes a year, a year and a half to come into effect,” he explained to journalists. “The commercial part must be approved by the authorities of the European Union and the authorities of each Mercosur country.”

In addition, the pact has other attached sections referring to environmental and labor issues, which also have to be approved by the respective regulatory bodies of each country, whose stages may be different depending on the processes of each country, added the chancellor.

[Con información de The Associated Press y Reuters]

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