EU tapping the Market of the South
Mercosur means the Common Market of the South (Mercado Común del Sur) and is a free trade zone which includes its founding memebers Argentina, Brazil, Paraguay and Uruguay as well as seven more associated and two observing members.
Mercosur comprises of 260 million consumers which makes it the world`s 5th-largest market outside of the EU with a yearly GDP of 2,2 trillion Euro. In 2016, the EU exported 42 billion Euros in goods and 22 billion Euros in services to the Mercosur countries. However, due to the high tariffs and non-tariff barriers the actual trade potential between the two markets has not been exhausted just yet!
Because every Trillion Euro spent on exports creates 14.000 new jobs in Europe, the EU is currently finalizing the negotiations surrounding an EU-Mercosur Association Agreement. European companies profit from five advantages:
1. Reduction of tariffs
The reduction of import tariffs in several sectors will provide the EU with a first mover advantage.
- cars (currently 35%)
- machinnery (currently 20-35%)
- chemicals and pharmaceutics (currently 14%)
- clothing and shoes (currently 26-35%)
2. Reduction of non-tariff barriers
A deepened cooperation between the EU and Mercosur in terms of creating common standards and procedures for goods.
3. More Services
Opening of the market as well as imporved legal certainty for EU- suppliers in the sectors technology, telecommunication, business and financial services, and transport.
4. More Public Procurement
Right now, Mercosur countries can participate in public biddings in the EU but not the other way around. Enabling EU countries to particpate in public procurement biddings in the Mercosur countries is part of the Agreement.
5. Easier market access for SME
Creating an online platform and preferential trade arrangements is targeted at simplifying the the market access of EU SME to Mercosur countries. In the past, particularly unclear import regulations have hindered their entrance.
Additionally, the Agreement includes regulations for agricultural businesses while acknowledging sustainability and furthering the Paris Climate Treaty.