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EU-Mercosur

Mercosur is a South American community of states, established in 1991. It comprises Brazil, Argentina, Paraguay, Uruguay and Venezuela. Venezuela asked to join as a full member in 2006, but the Brasilian Congress has still not ratified it, so Venezuela is only an observer so far.

The European Commission’s negotiations on a Free Trade Agreement with the Mercosur region are based on a region-to region approach. They cover services, investment and government procurement, and were launched in April 2000.

Besides aiming at going beyond both sides’ respective WTO obligations, the EU-Mercosur agreement is supposed to establish an effective and binding dispute settlement mechanism to help resolve trade frictions in the EU-Mercosur relationship.

The EU-Mercosur FTA is to become part of an inter-regional Association Agreement between the EU and the Mercosur community of states.

The negotiations collapsed in October 2004 over divergences between the two blocs on the level of commitments. Brazil and the Mercosur countries wanted more concessions from the EU on agriculture and agriculture products, while the EU wanted to get more commitments on the services negotiations.  The European Services Forum wrote a letter to EU Trade Commisisoner Pascal Lamy to express the dissatisfaction on the level of the Mercosur’s countries services offers.

ESF Letter to Trade Commisisoner Lamy – October 2004.

In 2009, EU-Mercosur trade represented nearly as much as EU trade with the rest of Latin America taken together. In 2008, the EU was Mercosur’s first largest trading partner, representing 20.7% of total Mercosur trade. In 2008, the EU was the largest investor in Mercosur. Mercosur ranks 8th among EU trading partners, accounting for 2.7% of total EU trade in 2009.

The EU is Mercosur’s first market for its agricultural exports, accounting for 19.8% of total EU agricultural imports in 2009. EU goods exports to Mercosur focus largely on industrial products including machinery, transport equipment and chemicals. The EU is the largest investor in Mercosur. It currently has more FDI stock in Mercosur than in Russia, China and India taken together.

On 4th May 2010, under the strong pressure by the Spanish EU Presidency, the European Commission decided to relaunch the negotiations on an Association Agreement with the Mercosur (Argentina, Brazil, Paraguay and Uruguay). The Commission believes that clear economic benefits for both the EU and Mercosur could be obtained from an eventual deal. Earlier negotiations were suspended in 2004.

On 19th May 2010, in the margin of the EU, Latin America and the Caribbean Summit in Madrid, Leaders decided to re-launch negotiations for an EU-Mercosur Free Trade Agreement.

On 14th June 2010, ESF Chairman, Christoffer Taxell, sent a letter to European Commissioner for Trade, Mr. Karel De Gucht, supporting the resuming of the EU-MERCOSUR Trade negotiations.  The letter is reminding the overwhelming importance of services and manufacturing in the economies of both regions, which should therefore drive the negotiations  instead of the talks on agriculture that seems to capture too much attention.  The European services industry if calling for an ambitious agreement, with significant progress made in the services commitments by the EU’s trading partners, and for a short negotiating time table.  A similar letter has been sen to the other relevant EU Institutions.

EU Trade Commissioner De Gucht replied to that letter on 30 June emphasising that he was “also aware that services and investment represent a significant part of our economic interests in the region, and that an ambitious agreement in these sectors would be of considerable value to EU services providers and investors. Our intention is to build upon offers expressed in the context of the DDA negotiations.”.

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