Mercosur-EU trade deal: Making sense of what has been agreed

Details of the Mercosur-EU free trade deal, such as a timeframe for implementation and the specific goods that will see tariff cuts, are still few and far between, but the information available in the few official documents made public so far could give an indication of what is to come.

An Argentine government document claims that 60% of what Mercosur offered in the talks will be implemented within 10 years at the earliest, “a very relevant percentage if we consider other countries agreements’ with the EU.”

According to estimates of Brazil’s economy ministry, the agreement will mean an increase of US$87.5bn in the country’s GDP over the next 15 years, which could reach US$125bn when considering the reductions in non-tariff barriers and increased productivity.

Meanwhile, the rise in investments in Brazil in the same timescale is projected to be US$113bn, said the ministry. Regarding bilateral trade, Brazilian exports could reach US$100bn by 2035, foreign relations department Itamaraty forecast.

According to the EU, the agreement will remove barriers for the bloc’s service suppliers in the information technology, telecommunications and transport sectors.

IT AND ELECTRONICS

A high-ranked official at Brazil’s science, technology, innovation and communications ministry (MCTIC), who was directly involved in the bilateral talks during previous governments and requested anonymity, told BNamericas that the most pressing technological and electronics issues of the trade deal had been resolved a month ago in Buenos Aires.

Electronics industry association Abinee has not yet commented on the agreement.

However, when referring to President Jair Bolsonaro’s recent announcement that his government is considering slashing the import tax on IT products such as cellphones and computers to 4% from 16%, the entity complained that such a measure would hurt local production.

The EU estimates the agreement will save European companies up to 4bn euros (US$4.5bn) a year in duties – four times more than the bloc’s FTA with Japan.

Over time, duties will be axed on 91% of goods that EU companies export to Mercosur, which in Brazil is known as Mercosul, the European Commission said.

Currently, EU machinery, including IT and telecom equipment, is taxed at 14-20%, while cars, car parts, clothing, textiles and leather shoes are hit by duties of up to 35%.

ROAMING

The terms of the deal focus on establishing a “level playing field for telecoms service providers, namely through dispositions dealing with the regulation (such as licensing, management of scarce resources or universal service obligations) as well as dispositions precluding anti-competitive practices,” the EU said.

There is also a set of consumer-oriented provisions, such as those pertaining to mobile roaming or confidentiality of communications.

Brazilian telcos association SindiTelebrasil said it did not have a position on the issue.

Currently, two of the four telcos operating nationwide in Brazil are owned by European groups – Vivo, controlled by Spain’s Telefónica, and TIM, controlled by Telecom Italia.

Telefónica also operates in Argentina and Uruguay – among other countries – under the Movistar brand, while Luxembourg-based Millicomoperates in Paraguay under the Tigo brand.

Meanwhile, Sweden's Ericsson and Finland's Nokia are, together with Chinese company Huawei, the chief suppliers of equipment to Latin American telcos.

E-COMMERCE

The Mercosur-EU agreement also contains general rules regarding e-commerce.

The goal here is to “remove unjustified barriers to trade made by electronic means, bring legal certainty for companies and ensure a secure online environment for consumers, with their data being appropriately protected,” the Europeans said.

The item includes binding rules banning the imposition of duties on electronic transmissions.

“The parties agreed on provisions aiming to ban excessive authorization procedures, to guarantee the legal validity and effect of electronic contracts and to preclude spreading spam,” the EU said.