Freight News, Business

South American trade deal is EU’s largest ever – updated

[ July 2, 2019   //   ]

The European Union said on 28 June that it had reached political agreement on its largest ever trade deal, with the South American Mercosur trading bloc comprising Argentina, Brazil Paraguay and Uruguay.

It said the new trade framework creates a market of 780 million people, and could provide big opportunities for EU businesses in countries where the EU has strong historical links but whose markets have been relatively closed up to now. The agreement will save European companies over €4 billion in customs duties, it added.

The agreement will remove most tariffs on EU exports to Mercosur, and boost exports of EU products that have so far been facing high and sometimes prohibitive tariffs such as cars (tariff of 35%), car parts (14-18%), machinery (14-20%), chemicals (up to 18%), pharmaceuticals (up to 14%), clothing and footwear (35%) or knitted fabrics (26%).

The EU agri-food sector will benefit from slashing existing Mercosur tariffs on chocolates and confectionery (20%), wines (27%), spirits (20 to 35%), and soft drinks (20 to 35%). The agreement will also provide duty-free access subject to quotas for EU dairy products (currently 28% tariff), notably for cheeses.

The agreement will open up new business opportunities in Mercosur for EU companies selling under government contracts, and to service suppliers in the transport, information technology and telecommunications sectors, among others. It will also simplify border checks, cut red tape and limit the use of export taxes by Mercosur countries.

Both sides will now perform a legal revision of the agreed text to come up with the final version of the Association Agreement before translation into official EU languages and submit it to EU Member States and the European Parliament for approval.

Director of Leeds-based forwarder Tudor International Freight, Adam Johnson warned that there could be dangers in this and other similar EU trade deals for the UK, however. He said: “As the UK is currently an EU member, its businesses benefit from over 40 trade agreements the bloc already operates with more than 70 countries and regions worldwide. Leaving the EU without a deal will mean the UK losing this preferential access to markets accounting for about 11% of our total trade, unless we agree new arrangements with the territories concerned.

“Yet the UK government has so far signed only 11 continuity agreements with these countries and regions and just one of them is within the 10 nations with which British companies do the most international business. In addition, Canada and Japan have refused to merely roll over their current trade treaties with the EU to a post-Brexit Britain if we leave the bloc without a deal.”

Mr Johnson said that should Britain depart the EU in these circumstances, tariffs and other barriers to commerce such as rules of origin, and quotas would apply immediately to goods traded with countries and regions with which UK-specific free trade agreements were not in force.

He said: “Despite these significant handicaps for British businesses, both contenders for the Conservative party leadership, one of whom will become our next Prime Minister this month, are refusing to rule out a no-deal exit from the EU by the end of October.”