The EU-Mercosur trade agreement still needs to be ratified by Europe's national parliaments
That this was successfully concluded last month has significance that goes well beyond the agreement itself. Provided it is ratified, it will offer benefits especially to European manufacturers and to Mercosur farmers. It will be phased in over 15 years, at the end of which it will have eliminated tariffs on over 90% of goods traded between the blocs, with tariff-free quotas for the remainder.
Just as important is the potential stimulus to reforming Mercosur’s economies and to regional integration within Latin America. Brazil and Argentina are among the world’s most closed economies. That is now likely to change. To take advantage of theagreement, they will have to lighten burdensome taxes and regulations and boost internal transport infrastructure. After rule by protectionist left-wingers, both now have governments that want to open up economically.
The long-awaited breakthrough reflects bigger changes. Both sides worry about the trade war and the geopolitical conflict between China and Donald Trump’s United States. China is now Mercosur’s largest single trade partner . Although theremains the largest investor in Latin America, Chinese investments and loans to the region have grown fast. China’s growing influence there is of concern not just to Mr Trump, but to Europe and Japan, too.
The Mercosur agreement is part of a broader European reassessment of Latin America. Both regions share a commitment to democracy and multilateralism, values that are on the defensive. In that sense, “though far apart geographically, we are closer than any other continents,” Federica Mogherini, the’s outgoing foreign-policy chief, stated in April. She unveiled a new policy statement aimed at achieving greater political co-operation between the two regions. This contains a healthy dose of realism.
Much can still go wrong. Ratification of the Mercosur accord by Europe’s national parliaments will take up to two years and will not be easy. If Mr Macri loses a presidential election in October, Argentina could pull out. Above all, distance and the press of other priorities may cause each side to lose interest once again. That would be a strategic error."The benefits of equidistance"
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