EU, Mercosur Negotiators Press On, Eyeing Deal in Near Term

13 July 2017

Negotiators from the EU and Mercosur continued their efforts to advance towards a region-to-region Association Agreement and related trade deal, holding their twenty-eighth negotiating round in Brussels, Belgium, from 3-7 July.

Talks between the two trading blocs have gained traction over the past year, with multiple negotiating rounds, and an exchange of market access offers in 2016. Officials have also said on multiple occasions that should this momentum continue, a political deal could be inked in 2017. The negotiations have been underway for nearly two decades, kicking off in 1999. (See Bridges Weekly, 23 March 2017 and 30 March 2017)

A meeting between Argentine President Mauricio Macri and German Chancellor Angela Merkel in June sparked further speculation that the trade talks may be making faster progress than they have in previous years. (See Bridges Weekly, 15 June 2017)

Negotiators report advances on “key issues”

During the latest round, officials worked on a range of topics, including trade facilitation, technical barriers to trade, and trade in services. Afterward, both sides released a joint communiqué stating that “progress had been made towards agreement on a number of key issues,” without specifying which of these areas, or the others also raised in Brussels last week, had seen the greatest advances.

However, agricultural market access reportedly remains a major sticking point, with Brazilian chief negotiator Ronaldo Costa Filho telling Reuters last week that the main points of market access in a trade deal would need to be hammered out if the two sides wish to reach any sort of accord.

“You cannot have an announcement of an agreement if you do not have the big numbers on market access. I cannot say I have finished and not know what the market access for beef and ethanol will be like," said Costa Filho in comments to the news agency. “I cannot go back home and say ‘tough luck’,” he added, referring specifically to ethanol.

Earlier this year, Macri reinforced this same concern when he stated that the EU has more work to do with “the protectionists in the EU agricultural sector.” The Argentine president recently reaffirmed that farm goods remain one of the most sensitive areas, telling reporters after a meeting with French President Emmanuel Macron this month that “everyone recognises that this is a problem,” according to comments reported by Deutsche Welle. (See Bridges Weekly, 15 June 2017)

Macri has also touted the benefits of bringing in greater investments from European countries into Mercosur’s domestic markets.

Along with agricultural market access, both sides are also negotiating on greater market access in services and public procurement, among other topics, according to a 2016 document released by the European Commission. They have also indicated an interest in protecting various geographical indications, which are a type of intellectual property protection used to denominate products with a specific geographical origin and which possess reputations or characteristics resulting from that location.

In a speech  in Madrid earlier this month, EU Trade Commissioner Cecilia Malmström touted the potential economic growth benefits of a future deal for both sides, such as by slashing tariffs and helping Mercosur members diversify their exports to the 28-nation bloc.

“Today, just 24 percent of Mercosur’s exports to the EU are manufactured products. For Mexico, since 2000 our free trade agreement has allowed manufactured products to become more significant; today they represent 70 percent of its exports to Europe,” she said.

Furthermore, she stated that there is a particular value in advancing these negotiations now, citing the economic recovery as well as concerns over “voices in favour of protectionism” in other parts of the world.” Argentine officials have similarly said that developing deeper ties to foreign markets could be a boon to their domestic economy, particularly after the inward-focused policies of the previous administration of Cristina Fernández de Kirchner. (See Bridges Weekly, 27 April 2017)

This sentiment echoes a recurring theme during trade-related discussions at the domestic and international levels, including the debate over how to address protectionism and trade in the latest summit of G20 leaders, which included officials from both the EU and some of the Mercosur countries. (For more on the G20, see related story, this edition)

Scheduled rounds

The parties have already announced their negotiating scheduled for the upcoming quarter, confirming that the next round will be in Brasilia, Brazil, from 2-6 October, preceded by an intersessional meeting in Brussels, Belgium, from 4-8 September.

Officials from both sides have said that clinching a deal in the coming months – even if it first takes the form of a political agreement – would show yet one more signal of each side’s commitments to trade liberalisation, open markets, and international collaboration, particularly in the current geopolitical context.

The EU is negotiating trade deals with various countries across different world regions, and is due to see its agreement with Canada take provisional effect in September. The bloc also announced with Japan a political accord on a future trade agreement last week, and is aiming to upgrade its existing trade deal with Mexico by year’s end. (See Bridges Weekly, 18 May 2017 and 6 July 2017)

Mercosur, for its part, is also working to develop stronger ties with other regional groups, such as the four-country Pacific Alliance. Three of the four members of Mercosur – Argentina, Paraguay, and Uruguay – are already observers to the Pacific Alliance.

ICTSD reporting; “Brazil foreign minister sees EU-Mercosur trade accord this year,” REUTERS, 14 March 2017; “Main points of Mercosur-EU trade deal need to be concluded in December: Brazil,” REUTERS, 6 July 2017; “Argentina y Francia analizan possible TLC entre Mercosur y la UE,” DEUTSCHE WELLE, 9 July 2017; “El Mercosur y la UE logran un crucial avance hacie un acuerdo de libre comercio,” LA NACIÓN, 4 July 2017.  

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