The main expected benefits of the EU-Mercosur agreement can be classified in three broad categories. First, the institutional consolidation through the development of political, economic and cultural strategic relationships between both regions, and a transparent normative framework that reduces the discretional application of economic policies. Second, the promotion of economic development by removing tariff barriers and reducing commercial procedural hurdles. Third, the consolidation of intraregional development and integration by harmonizing and simplifying customs procedures and technical regulations and standards.
The agreement covers the establishment phase of investment, as European Union FTAs traditionally do. In line with the new wave of European Union FTAs – with the exception of the Comprehensive Economic and Trade Agreement (CETA) (see our recent post) – the trade deal does not include a chapter on investment protection standards or investor-state dispute settlement mechanisms. However, the dispute resolution chapter – which covers the interpretation or application of trade provisions and breaches of party obligations – provides for the appointment of a three-arbitrator panel whose decision is final and binding. Recourse to mediation is possible at any time, before the initiation of a dispute or in parallel to the panel proceeding. In addition, the trade and sustainable development section provides for a specific dispute resolution mechanism. If a dispute arises between the parties concerning a member state’s breach, and it cannot be resolved by government consultations, a panel of experts may issue a public report and recommendations.
One of the aspects of the agreement that has drawn significant attention is the parties’ commitment to a “value-based trade agenda” – a recurring theme in recent European Union FTAs – and specifically the chapter on environmental protection and sustainable development. The agreement is the second – after the Economic Partnership Agreement between the European Union and Japan – to include a clause on the Paris Climate Agreement. In addition, the precautionary principle, which consecrates the parties’ right to adopt measures that protect the environment, health, and labor rights issues, is reaffirmed.
Reciprocal benefits of the EU-Mercosur Agreement Specifically, the EU-Mercosur Agreement increases access to both markets for industrial and agro industrial goods by eliminating tariffs and offering preferential tariff regimes. Mercosur’s agricultural goods’ sector – including beef, poultry, sugar and ethanol – is expected to benefit greatly from increased access to the European market. Intellectual property will be reinforced in Latin America, which will favor European companies in the technology and knowledge-intensive sectors, and offer legal guarantees set to protect from imitation 357 food and drink products recognized as Geographical Indications (GIs). For the European Union, the increased access to Mercosur’s market gives the bloc an advantage with respect to other players that will continue to face the region’s high tariffs and non-tariff barriers, and will result in over 4 billion euros in savings for European companies. The European automobile, wine, cheese, chemicals and industrial sectors are