Members of South America’s trade bloc, the Southern Common Market (Mercosur), agreed this week on a joint proposal to negotiate a trade and cooperation agreement with the European Union.
Four of the five members of Mercosur—Argentina, Brazil, Paraguay and Uruguay—agreed on a tariff reduction proposal to go before the EU on Thursday. Mercosur now awaits the EU’s decision.
According to the European Commission, “The objective is to negotiate a comprehensive trade agreement, covering not only trade in industrial and agricultural goods but also services, improvement of rules on government procurement, intellectual property, customs and trade facilitation, and technical barriers to trade.”
Recently Europe had been putting pressure on Mercosur to conclude negotiations and finalize a free trade agreement with the EU. This exchange of proposals was supposed to occur in December 2013, but has repeatedly been postponed.
Finalizing the agreement will purportedly increase Mercosur member nations’ combined gross domestic product by $5 billion. Their exports to Europe will also increase by 40 percent.
“Mercosur and the EU have been ‘engaged’ for more than 15 years. Isn’t it time to take the next step and make it official?” European Commission President Jose Barroso said on his recent trip to Brazil.
Why is Europe so eager for this trade agreement to be finalized? South America is rich in natural resources. This makes it an attractive hunting ground for resource-hungry European manufacturers. They need a constant supply of minerals to feed the hungry furnaces of the Ruhr and other industrial complexes of Europe. South America can provide these resources in abundance.
An EU-Mercosur combine could be a very big deal.
Date: August 5, 2014