After almost 20 years of negotiations Mercosur and the EU have reached an agreement. The EU is already Mercosur's biggest trading partner and its second largest for trade in goods. EU members will benefit from tariff reductions on goods such as cars and wine and could increase access for their industrial manufacturers. Mercosur aims to increase exports of farm products. It will get a new 99,000-ton beef quota at a 7.5% tariff, phased in over five years, along with tariff-free 180,000-ton quotas each for sugar and poultry. The agreement also covers industry, IP and SMEs, and has special provisions for Paraguay based on its market size and landlocked situation.
The main benefits for Mercosur and specifically for Paraguay are as follows:
- Industrial sector: The Mercosur industrial sector will have access for almost 100% of its exports to the EU through the progressive liberalization of tariffs over 10 years. Industrial development will be promoted through the reduction of tariffs for inputs and industrial raw materials, as well as capital goods.
- Intellectual property: the agreement contains solid provisions covering intellectual property rights including copyrights, trademarks, industrial designs, geographical indications and plant varieties. The section on intellectual property rights also includes comprehensive provisions on the protection of trade secrets.
- Small and Medium-Sized Enterprises (SMEs): The vast majority of companies in both the EU and Mercosur are SMEs and the agreement addresses their specific needs. It notably requires both parties to provide information on market access on a specific SME website and creates a 'SME Coordinator' on each side to cooperate in identifying ways for these companies to benefit from the opportunities offered by the agreement.
- Agricultural and processed agricultural sector: The sector of agricultural and processed agricultural goods exported by Mercosur will be duty free for 82% of trade, while the remaining 18% will have access to the European market through quotas or fixed preferences. Less than 100 EU products will be excluded from tariff dismantling.
- Technical standards and sanitary and phytosanitary measures: Bilateral trade will be promoted and stimulated through the elimination of non-tariff barriers, greater transparency in the application of sanitary and phytosanitary measures, and establishment of a facilitation scheme in the application of customs and administrative rules.
- Special and differentiated treatment for Paraguay for certain sectors and recognition of country’s limits/over costs due to its landlocked situation:
- Auto-Parts Sector: Paraguay obtained an additional 5% with respect to the other Party States for the importation of non-originating materials, reaching 55% four years after effectiveness of the Agreement.
- Public Procurement: Paraguay negotiated the exclusion of public procurement purchase thresholds, preserving the market for national companies.
- River services: Paraguay achieved the exclusion of river transport services in the Agreement to continue targeting such transport for Paraguayan flag vessels.
- Trade Defense: Additional deadlines were set for the application of trade defense instruments, affording the national production sector a longer period than the other Party States of MERCOSUR and the European Union
The implementation process is scheduled to start soon but may take a couple of years along with more specific issues that will probably be addressed within EU and Mercosur. However, it is a big step forward for a potential market of some 780 million consumers.