EU, Mercosur Negotiations to Resume, Officials Suggest Deal Possible Soon

9 May 2018

Negotiators from the EU and South American customs bloc Mercosur are reportedly due to reconvene this month, as officials push for an agreement in principle that would help wrap up the nearly two-decade-old trade talks. 

Officials are slated to meet this month in the Paraguayan capital city of Asunción, according to the country’s foreign affairs minister, Eladio Loizaga Caballero, who told reporters that he has been consulting with this counterparts both within the Mercosur bloc and across the Atlantic in Europe.

Brussels has been negotiating an association agreement with Argentina, Brazil, Paraguay, and Uruguay since 1999, which would include a trade deal. If agreed, the trade accord would cover a shared market of well over 750 million people, including areas such as goods and services trade, government procurement, intellectual property, small and medium-sized enterprises, and sustainable development.

Over the past 18 months, the pace of the negotiations has accelerated, with officials from both blocs convening repeatedly in a bid to wrap up the talks before political calendars get in the way. While Paraguay already held elections last month, Brazil is due to hold elections in October, while Argentina and Uruguay will have elections next year.

On the EU side, the bloc’s institutions could see shakeups when the current European Commission’s mandate comes to an end in 2019 and new European Parliament elections are held that same year.

With those timeframes in the background, trade talks have been held on various occasions throughout the year, with the most recent round taking place during the last week of April. Officials afterward indicated that while they made some advances, political sensitivities remain unresolved.

Disagreements over beef, ethanol, and automobile trade, which have long been sensitive topics for both side in the EU-Mercosur process, have proven to be among the most challenging areas to tackle, though recent reports indicate that these gaps may be narrowing down to the most sensitive political details, and that some progress has been made in pinning down numbers for beef volumes and opening up automobile market access.

Other challenging areas reportedly include opening up public procurement market access, along with certain sensitive services sectors.

Officials suggest endgame may begin soon

Brazilian President Michel Temer said last week that the EU-Mercosur talks are “practically done,” suggesting that the accord, if completed, would be another form of warding off protectionist pressures while also reinforcing the Mercosur bloc’s original mission of open markets.

The four-country coalition has undergone a series of political transitions, as well as economic highs and lows, over the two decades that the trade negotiations have been underway, including periods where some of its members were pursuing more inward-focused economic policies. More recently, the group has been reinvigorating its efforts to deepen economic ties with key partners, including the EU as well as with the neighbouring Pacific Alliance group of Chile, Colombia, Mexico, and Peru.

Temer is not the only official who has suggested that the EU-Mercosur negotiations may soon be in the final stages, with EU Trade Commissioner Cecilia Malmström recently telling Agence France Presse that she expects a deal this year, and dispelling suggestions that the talks may be “in the freezer.”

Loizaga, the Paraguayan foreign affairs minister, also suggested in announcing the upcoming meetings that he expects a deal to be reached shortly. He noted in earlier comments on Twitter, however, on 28 April, that the South American coalition would need to see more flexibility from their European partners, a point that EU officials have similarly made about Mercosur.

“We expect flexibility from the European Union, the whole burden does not need to fall on Mercosur. We need to share the load between both blocs,” he said, in a Twitter post shared by the foreign affairs ministry.

EFTA officials press for own deal, watching EU-Mercosur timeframe

The push to seal a deal has also drawn the attention of other trading blocs, notably including the European Free Trade Association (EFTA), the coalition that includes Iceland, Liechtenstein, Norway, and Switzerland.

The EFTA bloc has deep economic ties with the European Union, with all EFTA members except Switzerland being part of a so-called internal market that applies the central tenets of the EU’s own “single market” – namely that of free movement of people, capital, goods, and services, known collectively as the “four freedoms.” This partnership is codified under the Agreement on the European Economic Area. Switzerland and the EU, meanwhile, have inked a host of bilateral deals, which cover aspects like single market participation, among other areas.

EFTA and Mercosur began negotiating their own free trade agreement in 2017, and have held three formal rounds to date, with the latest being held this past April. The planned deal would cover issues ranging from goods and services trade to public procurement, investment, and sustainable development, officials say.

While the dates of the next round have not been confirmed, officials have indicated that these will occur in the summer months. In the meantime, Swiss Economy Minister Johann Schneider-Amman wrapped up a visit to the Mercosur countries this past week, telling reporters that clinching an EFTA-Mercosur trade accord in the short term is imperative, particularly given the advances being seen with the EU-Mercosur deal.

“What’s important is that we are very close behind [the European Union]. If we manage to secure an EFTA-Switzerland deal six months after the EU that would balance things out,” he told Radio Television Suisse, a local news outlet.

ICTSD reporting; “EU, Mercosur end trade round with little progress, more blaming,” REUTERS, 27 April 2018; “Johann Schneider-Ammann achève sa tournée en zone Mercosur,” RJB, 6 May 2018; “L'accord commercial UE/Mercosur "pas mis au frigo", selon Malmström,” LE FIGARO, 4 May 2018; “Nueva ronda de negociaciones entre Mercosur y UE a mediados de mes en Paraguay,” MERCOPRESS, 7 May 2018;  “Swiss economics minister upbeat about Mercosur free trade deal,” SWISS INFO, 8 May 2018; “Temer dice que Mercosur y la UE están "prácticamente cerrando" acuerdo,” EFE, 4 May 2018.

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