By Philip Blenkinsop
BRUSSELS (Reuters) – The European Union and South American bloc Mercosur agreed a free-trade treaty on Friday, concluding two decades of talks and signaling their push for opening markets at a time of increased protectionism.
The two regions launched negotiations exactly 20 years ago and intensified efforts to reach an accord after Donald Trump’s presidential victory prompted the European Union to freeze talks with the United States and look for other global trading allies.
As world leaders meet at a G20 summit in Japan, EU Trade Commissioner Cecilia Malmstrom told a news conference the deal sent a “loud and clear message” in support of open trade.
The EU’s push away from the United States has seen it start a free trade agreement with Canada and reach agreements with Japan and Mexico and now, after some 40 rounds of talks, a provisional deal with the grouping of Argentina, Brazil, Paraguay and Uruguay.
For Mercosur, the EU is the first major partner with which it has struck a trade pact, potentially giving EU firms a head start. The European Union is already Mercosur’s biggest trade and investment partner and its second largest for goods trade.
In terms of tariff reduction, it could be the EU’s most lucrative trade deal to date, with some 4 billion euros ($4.55 billion) of duties saved on its exports, four times more than its deal with Japan.
Europe has its eyes on increasing access for its companies making industrial products, notably cars for which tariffs are 35%. It also wants to allow its firms to compete for public tenders, and to sell more wine and cheese. Mercosur aims to increase exports of farm products.
Brazil said the agreement would eliminate import tariffs for several farm products, including orange juice, instant coffee and fruit. It will also get a new 99,000 tonne quota of beef at a 7.5 percent tariff, phased in over five years, along with tariff-free 180,000 tonne quotas each of sugar and of poultry.
EUROPEAN NERVES OVER BEEF, ENVIRONMENT
Brazil’s President Jair Bolsonaro said on Twitter that the deal was historic and one of the most important trade agreements of all time.
Past deadlines had come and gone, because of EU nerves about a surge of beef imports and Mercosur hesitation about opening up some industrial sectors, such as cars.
The agreement still faces challenges before it can enter force. EU countries and the European Parliament both need to give their backing.
France and some other EU countries fear the impact of a sharp rise in beef imports, while environmental groups, whose influence is stronger in the new European Parliament, argue that the agreement could exacerbate deforestation.
The parties said they both committed to implement the Paris climate change agreement and that a special chapter on sustainable development would cover issues such as forest conservation and labor rights.
EU Agricultural Comissioner Phil Hogan said he recognized the concerns of farmers, including from his country, Ireland, but that free trade agreements struck by the bloc as a whole were opening market for EU farmers.