EU inks record trade deal in South America
ratification won't be easy

EU inks record trade deal in South America

The European Union and the South American economic bloc Mercosur agree to a pact covering 780 million people. It's the latest in a flurry of deals penned since Donald Trump took office.

STUTTGART (AEB) - The European Union and the South American economic block Mercosur – made up of Argentina, Brazil, Uruguay, and Paraguay – have signed a trade agreement that both sides say will remove or reduce trade tariffs and make imported products cheaper while increasing exports.

The deal, 20 years in the making and covering nearly 800 million people, is expected to not only have a major impact on trade between the two blocs but sweeping political ramifications as Mercosur sets its sights on an agreement with Washington where it faces a rising tide of protectionism.

EU trade deal
EU trade deal

For the EU, it means another major pact in a two-year span that has included agreements with Mexico, Canada, and Japan.

Then European Commission President Jean-Claude Juncker said the agreement, the largest of its kind for the EU, sends “a strong signal with our Mercosur partners that we stand for rules-based trade. Through this trade pact, Mercosur countries have decided to open up their markets to the EU.”

Argentine President Mauricio Macri, at a recent briefing with reporters, said the “agreement with the EU is the result of collective work, in which we demonstrate vocation and commitment at the highest level. We should feel proud of having pursued this goal with tenacity. It is an opportunity for Mercosur to go for more, in an ambitious foreign agenda of negotiations.”

Not everyone is happy though

Irish farmers, for example, have accused the EU of a double standard. 

“It is totally unacceptable that the commission is prepared to sacrifice Irish and European farmers, but they are also giving the green light to the further destruction of rainforests,” said Joe Healy, president of the Irish Farmers’ Association. 

“Farmers are sick of the double speak from the EU Commission which lectures us on climate change, but is prepared to do a deal with a country with a climate destruction agenda.”

Highlights of the agreement

The EU said its list of highlights in the agreement included,

  • The removal of the majority of tariffs on EU exports to Mercosur, making EU companies more competitive by saving them €4 billion worth of duties per year.
  • The boosting of exports of EU industrial products that have so far been facing high and sometimes prohibitive tariffs. Those include cars, car parts, machinery, chemicals, pharmaceuticals, clothing and footwear, or knitted fabrics.
  • The cutting of tariffs on EU agricultural export products, including chocolates and confectionery, wines, spirits, and soft drinks. The agreement will also provide duty-free access subject to quotas for EU dairy products, notably for cheeses.

Benefits of the deal

Mercosur said the deal ,

  • Establishes a strategic and permanent political, cultural, and economic link with the EU.
  • Energizes access to goods, services, and investments by reducing and eliminating restrictions.
  • Promotes regional integration by implying a new stage in the relationship of Mercosur countries, boosting intra-regional trade.
  • Includes special programs that facilitate their integration into global value chains, technical assistance, participation in government purchases, joint ventures, partnerships, business networks, transfer of know-how, and financial assistance.
  • And facilitates the increase of foreign investment.

Difficulties for individual companies arise

But while such agreements are powerful economic and political tools for nation blocs like the EU and Mercosur, for individual companies they can be difficult to understand and navigate no matter where you are located or what countries you do business in.

AEB software offers the solution

At AEB, our Origin & Preferences software offers a solution for this quandary by understanding whether your company can take advantage of a specific preferential trade agreement.

Determining if a product qualifies for preferential origin and can be imported into the country of destination under preferred conditions is an extraordinarily complex undertaking, dependent on the interaction of numerous rules.

AEB software knows all the terms of such preferential trade agreements and takes them into account for you. And detailed documentation ensures you can provide the necessary information to both customs authorities and your own customers.

Also, our Supplier Declaration Exchange software makes it easier to obtain and organize supplier’s declarations. Reduce the time employees spend requesting, tracking, checking, and inputting supplier’s declarations. Reduce error rates by running plausibility checks and avoiding disruptions in the digital data flow. Built-in support and a user-friendly interface increase acceptance among suppliers.

The EU-Mercosur agreement is expected to be ratified by 2021 though not without some heated discussions. France is already objecting to the agreement “in its current form.”

The agreement still needs to be approved by the national parliaments of all member countries of both blocs, as well as by the European Parliament and EU Council.

Once in place, AEB’s Origin & Preferences software will address its details and stipulations.