The European Union, South America’s Mercosur bloc sign a historic free trade agreement
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The European Union and the Mercosur bloc of South American countries formally signed a landmark long-sought free trade deal on Saturday, ending more than a century of tortuous negotiations to strengthen trade ties in the face of rising protectionism and global trade tensions.
The signing ceremony in Paraguay’s humid capital Asunción marks a major political victory for the EU in the era of US tariffs and increased Chinese exports, expanding the bloc’s territory in a resource-rich region hotly contested by Washington and Beijing.
It also sends a message that South America maintains various trade and diplomatic relations as US President Donald Trump declares dominance in the Western Hemisphere.
European Commission President Ursula von der Leyen, who heads the EU’s executive branch, said the “national importance of this deal cannot be overstated” amid renewed doubts about the benefits of free trade.
“We choose fair trade over costs. We choose productive, long-term relationships instead of isolation,” he said at an event attended by the presidents of Mercosur members Argentina, Uruguay and Paraguay, and the foreign minister of the trade union’s largest economy, Brazil.
“We will join forces in a way we have never done before, because we believe that this is the best way to make our people and our countries successful.”
G7 finance ministers and central banks wrapped up three days of meetings Thursday in Banff, Alta., amid global trade uncertainty. European Central Bank President Christine Lagarde tells Power & Politics that the ‘common goal’ of Europe and Canada should be to ‘remove uncertainty’ and ‘agree on rules of the game that benefit all parties.’
The deal removes more than 90% of the fees
In creating one of the largest free trade areas in the world, the agreement – driven by South American countries famous for raising cattle and European industrialists eager for new markets for cars and machinery – brings together a market of more than 700 million consumers that accounts for a quarter of the total domestic product.
After decades of delays, the politically explosive deal still has to clear one final hurdle: ratification by the European Parliament. Powerful defenders on both sides of the Atlantic, especially European farmers who fear the possible dumping of cheap South American agricultural products, have long sought to override the agreement and could stop its implementation.
Although the agreement removes more than 90 percent of tariffs on goods and services between the European and Mercosur markets, some tariffs will be gradually reduced over 10 to 15 years and important farm products such as beef will be cut with strict quotas in an attempt to ease fears among European farmers.
Those estimates, along with protectionist measures and massive EU subsidies for cash-strapped farmers, pushed Italy’s agricultural power over the line earlier this month. France, however, is still opposed to this agreement.
