Provisional application of the trade agreement with Mercosur important
The EU’s trade agreement with the Mercosur countries in South America (Argentina, Brazil, Paraguay and Uruguay) should enter into force immediately. The longer we wait, the greater the economic costs. Two of the South American countries have now done their part, and it is time for the EU to do our part.
The EU’s trade agreement with the Mercosur countries in South America (Argentina, Brazil, Paraguay and Uruguay) should enter into force immediately. The longer we wait, the greater the economic costs. Two of the South American countries have now done their part, and it is time for the EU to do our part.
Negotiations on the trade agreement between the EU and Mercosur began more than 25 years ago. After nearly two decades, during which negotiations were restarted and paused several times, the parties reached a political agreement in 2019. Under the original timeline, the agreement was expected to start being applied in 2021.
Nearly five years later, the agreement is still not in place due to internal disagreements within the EU. These delays have already cost the EU substantial export revenues and GDP gains that the agreement, through increased exports and improved access to imports, could have generated.
The agreement is important from both a strategic and an economic perspective. In an uncertain global environment marked by growing geopolitical tensions, stronger ties between the EU and Mercosur are strategically significant. The Mercosur countries have strong access to raw materials and minerals that the EU needs for the green and digital transitions. At the same time, tariffs in Mercosur remain high on several goods that are central to European exports, such as motor vehicles, textiles and chemicals. A key benefit of the agreement is therefore the removal of most tariffs. The agreement will also improve import conditions. In addition, the agreement will make it easier for European companies to sell services and invest in the region.
The EU has already suffered significant losses from the failure to bring the Mercosur trade agreement into force on time.
In January this year, the European Parliament decided to request an opinion from the European Court of Justice on the agreement’s compatibility with EU law. As this risks further delaying its application, Member States simultaneously gave the European Commission the green light to proceed with the agreement once at least one Mercosur country has approved it. Two countries, Argentina and Uruguay, have now ratified the agreement in their national parliaments, meaning that it can be provisionally applied.
It is essential that the agreement can be used as soon as possible in order to avoid further costs. According to estimates by the European Centre for International Political Economy (ECIPE), the EU has so far missed out on export revenues of EUR 183 billion and GDP growth of EUR 291 billion due to the agreement not being implemented in 2021 as planned. A further delay of one year would result in additional losses, bringing the cumulative cost to EUR 216 billion in exports and EUR 344 billion in GDP. These are substantial amounts that could make a real difference to the European economy.
The EU has already suffered significant losses from the failure to bring the Mercosur trade agreement into force on time, but the positive effects of the agreement remain. It is important for business, for economic development, and for the EU’s credibility as a reliable global trading partner. The costs of further delays risk becoming even higher. Therefore, the agreement should be provisionally applied as soon as possible, allowing companies to start using it and ensuring that the economic benefits are realised without delay.