Trade relations between the EU and Latin America Latin America is the top priority for economic, social, cultural and even family ties between the two sides of the Atlantic. The countries of the EU, Latin America and the Caribbean are natural allies, united by strong historical, cultural and economic relations, which cooperate very closely at international level, where intensive political dialogue is conducted at all levels. A constructive way out of this conundrum – although unlikely given the Anti-Trade attitude of the Argentine government – would be to turn Mercosur into a free trade agreement rather than a customs union. A free trade agreement can maintain the current zero duty for intra-bloc trade, while providing members with room to negotiate their own trade agreements with other countries. The United States should follow this path by actively seeking a free trade agreement with Brazil, which would have the added benefit of diversifying its supply chains. I hope that a more open and flexible bloc will emerge, giving the citizens of Argentina, Brazil, Paraguay and Uruguay hope for a more prosperous future. Mercosur is formally a customs union. While a free trade agreement involves a commitment between countries to lower tariffs and other trade rules granting preferential market access, a customs union adds a common external right for imports into the bloc and a commitment by its four members to negotiate trade agreements with third countries. In theory, this means that each country has preferential access to the markets of other members and increased bargaining power in trade agreements, much like for the members of the European Union. In practice, trade within the bloc is entangled in bureaucracy, non-tariff barriers and agreements restricting private trade. Very few external negotiations have been concluded, so Mercosur is the most closed region in the world, with an average tariff of more than 12%. The only comprehensive free trade agreements signed by Mercosur since its inception in 1994 were with Egypt and Israel, and all Mercosur trade agreements cover less than 10% (calculations based on the World Bank`s Global Development Indicators) of global GDP.
This briefing note explains what we know about the proposed trade agreement, what we do not yet know and what the consequences are for people and forests. Tackling climate change, maintaining forests and respecting people`s right to make decisions about their own lives can only be done if trade is done in a way that promotes supply chains without deforestation and respects the rights of the community and indigenous peoples. The EU-Mercosur agreement is far from reaching this standard. The agreement came after twenty years of negotiations. Talks began in 1999, but stagnated before regaining momentum in 2016.  The talks had failed for years due to opposition from European beef producers, especially small farmers, who feared being underestimated by imports from Brazil, the world`s largest beef producer.  Many South American governments at that time preferred „South-South cooperation“ to building relations with Europe, while European governments also had other priorities.  In 2000, the parties started negotiations for an Association Agreement which is part of three chapters: political dialogue, cooperation and trade. Negotiations were suspended in 2004 due to fundamental differences in the trade chapter. Political relations continued, notably with the signing of an agreement extending relations to three new areas, science and technology, infrastructure and renewable energy, at the EU-MERCOSUR Summit in Lima in 2008. . .