Conclusion of EU-Mercosur agreement: disclosed data and next steps

Plastics Sector

Think Plastic Brazil

By Apex-Brasil

On Friday, June 28, headlines in Brazil were taken by the conclusion of the European Union-Mercosur agreement, exactly 20 years after its launching. When in force, the agreement will create the largest area of preferential trade worldwide, with over 770 million consumers and GDP of USD 20 trillion, around one fourth of the world economy.

On July 4th, Brazil published a summary of the agreement concluded at political level. The disclosure of official texts is expected for the coming weeks.

With the agreement in force, Mercosur will liberate 91% of its tariff lines to European exporters and the EU will do the same for 95% of its import lines from Mercosur. Schedules for tariff reduction vary, depending on the sector, and may occur in up to ten years in most cases, or up to 15 years for some tariff lines in Mercosur automotive sector.

In sector reduction, Mercosur will open 91% of imports of industrial goods and 95% of agricultural sectors. The EU, on the other hand, will liberate 100% of its imports of industrial goods and 82% of agricultural importations. For agricultural sectors considered sensitive, partial liberation was negotiated by means, for example, of tariff quotas. Agricultural tariff quotas as granted by the EU are listed below:

Bovine meat: 99 thousand tons carcass-weight equivalent (CWE), 55% of them chilled meat and 45% frozen meat, with intra-quota tariff of 7.5%. The agreement also determines tariff elimination of Mercosur countries at quota Hilton, of WTO. Liberation for bovine meat will occur linearly in six annual stages.

Chicken: 180 thousand tons CWE, without intra-quota tariff, 50% with bones and 50% boneless. Liberation will occur linearly in six annual stages.

Pork: 25 thousand tons, with intra-quota tariff of EUR 83 per ton. The quota volume will increase linearly in six annual stages.

Sugar: tariff elimination in 180 thousand tons of Brazil quota in WTO of sugar for refining, when the agreement comes into force.

Ethanol: 450 thousand tons for chemical use, with zero intra-quota tariff, and 200 thousand tons for all uses, with intra-quota tariff at one third of WTO tariff. Liberation will occur linearly in six annual stages.

Rice: 60 thousand tons at zero tariff. Liberation will occur linearly in six annual stages.

Honey: 45 thousand tons at zero tariff. Liberation will occur linearly in six annual stages.

Corn: 1 thousand tons at zero tariff, when the agreement comes into force.

For the following products, reciprocal tariff quotas will be open by both sides, with ten-year transition:

Cheese: 30 thousand tons at zero intra-quota tariff. The quota volume will increase linearly over ten years until reaching 30 thousand tons, and tariff reduction will also occur linearly in ten annual stages.

Powdered milk: 10 thousand tons at zero intra-quota tariff. The quota volume will increase linearly over ten years until reaching 10 thousand tons, and tariff reduction will also occur linearly in ten annual stages.

Infant formula: 5 thousand at zero intra-quota tariff. The quota volume will increase linearly over ten years until reaching 5 thousand tons, and tariff reduction will also occur linearly in ten annual stages.

The agreement ratification follows specific processes in each of the parties. At Mercosur, each party-state will conclude the ratification according to their respective processes. In Brazil, the agreement will receive the signature of the Presidency of the Republic before being forwarded to the National Congress for appreciation by the Chamber of Deputies and Federal Senate. Once approved in the Legislative, the Senate authorizes the Executive to ratify the agreement.

In the EU, on the other hand, the process occurs differently. Below we present a brief summary of how trade agreements ratification occurs in the block: