- World
- Jan 19
- Sreesha V.M
EU, MERCOSUR sign trade deal after 25 years of negotiations
• The European Union and the MERCOSUR signed a Free Trade Agreement (FTA) in Paraguay on January 17.
What is MERCOSUR?
• The Southern Common Market or MERCOSUR (Spanish initials of Mercado Común del Sur) is a regional integration process, initially established by Argentina, Brazil, Paraguay and Uruguay, and subsequently joined by Venezuela and Bolivia.
• Venezuela, which officially joined in July 2012, was suspended from membership in 2017.
• MERCOSUR was established in 1991 by the Treaty of Asuncion, which was later updated in 1994 by the Treaty of Ouro Preto.
• Although Bolivia became a full member of MERCOSUR in July 2024, the country is not part of the agreements, as the negotiations were largely concluded before its accession.
Highlights of the trade deal:
• The EU is MERCOSUR’s second-largest trading partner in goods, with exports of €57 billion in 2024.
• The EU accounts for a quarter of total MERCOSUR trade in services, with EU exports to the region amounting to €29 billion in 2023.
• The EU is the biggest foreign investor in MERCOSUR, with a stock of €390 billion in 2023.
• The EU-MERCOSUR Partnership Agreement (EMPA) and the Interim Trade Agreement (iTA) will create one of the biggest trade zones in the world covering a market of around 700 million consumers.
• EU firms will enjoy a first-mover advantage, benefitting from lower tariffs in a region where most other countries face high tariffs and other barriers to trade.
• It is estimated the agreement can increase EU annual exports to MERCOSUR by up to 39 per cent (€49 billion) supporting more than 440,000 jobs across Europe.
• It will reduce often prohibitive MERCOSUR duties for EU exports, including on key industrial products, such as cars (currently 35 per cent), machinery (14-20 per cent), and pharmaceuticals (up to 14 per cent).
• The agreement will make it easier for EU companies to invest in key supply chains, including for critical raw materials and related goods, all with a high level of environmental and labour protection.
• This can play a pivotal role in advancing the green and digital economic transformations of both regions, while ensuring predictable and stable supply chains.
(The author is a trainer for Civil Services aspirants.)