Analysis of the EU–Mercosur Free Trade Agreement

The EU trade agreement with the Mercosur countries, Argentina, Brazil, Paraguay and Uruguay, is an association agreement of which trade is one part. The National Board of Trade has reviewed the agreement in a number of areas, sectors, and goods, and analysed the effects that the agreement may have. Emma Sävenborg, who coordinated the paper, tells more.

What was your focus in the analysis?

The analysis focuses on the outcome of the agreement in a number of areas, sectors, and goods, as well as the effects that the Mercosur agreement may have.

What is your conclusion?

We conclude that the agreement will lead to several improvements and simplifications for companies wishing to trade with the Mercosur countries. The agreement also creates increased opportunities for cooperation and dialogue in areas where the EU and Mercosur are far apart, such as animal welfare and the use of antibiotics, and this could have positive effects in the long term.

However, the agreement is not as far-reaching as the EU’s recently launched free trade agreement with Japan and Canada. It would have been desirable if the parties had settled on more binding agreements and more ambitious commitments.

How will the agreement affect Swedish companies?

The agreement will lead to reduced tariffs when importing and exporting, although in some cases this will take a long time. It also provides several concrete benefits that will save both time and resources for companies that want to trade with the Mercosur countries; amongst other things, trade procedures will be simplified. Better access to information on the rules and procedures that apply will also make trade easier, especially for small and medium-sized enterprises that want to conduct business with Mercosur countries.

How will the agreement affect the climate?

The environmental effects the agreement depend to a large extent on the countries’ national legislation and ambition in the environmental field, as well as consumers’ and companies’ preferences and initiatives. What we do know is that the Mercosur agreement will affect the economies of both parties, which in turn will have environmental consequences.

The impact assessment commissioned by the European Commission shows that the agreement will most likely lead to an increase in greenhouse gas emissions. However, the picture may be different if the agreement leads to the use of new technologies, and if new sharper instruments are introduced in the countries concerned.

Because the agreement entails increased production of agricultural products in the Mercosur countries, there is also a risk that more land will be used for cultivation, and if legislation is insufficient, this could have negative effects on the environment and the climate.

You have received comments from several Swedish authorities and organisations, briefly, what did they bring forward?

Many authorities consider that the level of ambition is not high enough, and that in some cases there are not enough binding provisions in their areas of expertise. Some business organisations note the competitive advantages that the agreement will provide for companies, and points out that the EU and Mercosur can now cooperate more easily on important sustainability issues.

Several civil society organisations point to the negative consequences of the agreement and ask whether they are addressed. These mainly concern sustainability-related issues such as increased carbon emissions, deforestation, indigenous peoples’ rights, and antibiotic resistance. These are important issues that we have commented on within the scope of our analysis.

What distinguishes this agreement from other EU free trade agreements?

Because it involves more than 750 million people, it is the largest agreement the EU has concluded with any other trading partner. In terms of GDP, it is second only to the Japan agreement. It is also an association agreement in which trade is only one part together with with political dialogue and cooperation. Unlike those with Japan, Vietnam or Canada, it is a single agreement with several countries in a regional trade bloc. It thus has the advantage of creating uniform rules for several countries, but this makes in-depth market integration more difficult.

Download the English summary through the button above. The full analysis is only available in Swedish: Analys av frihandelsdelen i associeringsavtalet mellan EU och Mercosur