EU-Mercosur deal: Potential, but hurdles ahead

3 min
Georges Dib
Georges Dib Economist for Latin America, Spain and Portugal

After twenty years of negotiations, the EU-Mercosur (Brazil, Argentina, Uruguay and Paraguay) trade deal was signed on 28 June, sending a strong political statement amid a tense G20 meeting on trade issues. Yet, the deal still has to be ratified by the EU parliament and by several national and regional parliaments. It could take more than two years, as we see hurdles ahead: political “vigilance” from the French, Polish and Irish governments; opposition from European agricultural lobbies and green parties; election risk in Argentina. Second, in terms of tariff elimination for the EU’s exports (91%), it is the largest deal the EU has struck. The deal also eliminates tariffs on 93% of Mercosur’s exports. Lastly, preliminary estimates of export gains from the deal stand at EUR5bn in total for the EU yearly: the machinery (EUR1.7bn), chemicals (EUR1.1bn including pharma) and vehicles (EUR821mn) sectors would be the main winners. But the EU agrifood sector could face competition from imported beef, ethanol, poultry, coffee and sugar, among others. The deal would put pressure on Mercosur’s industry in the short term, potentially helping it to becoming more competitive in the medium term.