EU and Mercosur strike trade pact after 20-year talks

EU-Mercosur concludes negotiations in Brussels, 28 June 2019.

The European Union and South American bloc Mercosur agreed a free trade treaty on Friday, concluding two decades of talks and committing to more open markets in the face of a rising tide of protectionism.EU Commission chief Jean-Claude Juncker said it was the EU's biggest deal to date and, at a time of trade tensions between the US and China, showed that "we stand for rules-based trade". Brazil's President Jair Bolsonaro said it was "historic" and "one of the most important trade deals of all time".

Mercosur consists of Argentina, Brazil, Uruguay and Paraguay. Venezuela is also a member but it was suspended in 2016 for failing to meet the group's basic standards. The deal aims to cut or remove trade tariffs, making imported products cheaper for consumers while also boosting exports for companies on both sides. It is set to create a market for goods and services covering nearly 800 million consumers, making it the largest in the world in terms of population.

The two parties began negotiating in 1999 but talks accelerated after US President Donald Trump's election in 2016. As a result EU-US talks were frozen. The EU has also concluded trade agreements with Canada, Mexico and Japan since Trump's election.

However, the EU deal with Mercosur could see savings on tariffs that are four times as big as those made in the Japan deal, EU trade commissioner Cecilia Malmstrom said. She said it sent a strong message that both the EU and Mercosur were in favour of "open, sustainable and rules-based trade".

If ratified, the deal will be a victory for Bolsonaro, whose right-wing politics face a chilly reception in much of the world, as well as Argentine President Mauricio Macri, who is battling for reelection this year amid a steep recession

Speaking to reporters, Argentine Foreign Minister Jorge Faurie said Mercosur had hitherto been a "very closed commercial space" but that the deal with the EU sent a "very clear message about where we are going". Argentina's Secretary of International Relations Horacio Reyser said it would boost GDP, create jobs and attract investment.

However, the environmental group Greenpeace said the deal - and the likely growth in demand for Latin American agricultural products - amounted to a "disaster for the environment on both sides of the Atlantic". Ahead of the deal's announcement, it said the agreement would lead to more destruction of the Amazon rainforest and attacks on indigenous peoples. Cattle farming is already the biggest driver of deforestation, Greenpeace says. Critics say Bolsonaro's plans to weaken environmental protections also threaten the Amazon.

The EU is already Mercosur's biggest trade and investment partner and its second largest for trade in goods, Reuters reports. The EU wants to increase access for firms that make industrial products and cars - which are currently subject to tariffs of up to 35% - and also enable them to compete for public contracts in Mercosur countries.

Mercosur wants to increase exports of beef, sugar, poultry and other farm products. In a statement, Brazil said the deal included eliminating tariffs on products such as orange juice, instant coffee and fruit. Meanwhile, producers of other products such as meat, sugar and ethanol would have greater access to the EU market through quotas, the statement said.

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