New Free Trade Deal Announced Between European Union and Mercosur Trade Bloc

December 6, 2024 TruthUSA

European Commission president Ursula von der Leyen described the agreement as a win-win.

The European Union and Mercosur—a trade bloc of Latin American nations—have finally reached a long-awaited free trade agreement after 25 years of negotiations.

The EU-Mercosur trade pact will establish one of the largest free trade zones globally, encompassing more than 700 million people and around a quarter of the world’s GDP.

Similar to other agreements, this trade pact will reduce tariffs and trade barriers, facilitating smoother export processes for companies on both sides of the Atlantic Ocean.

The Mercosur countries—Argentina, Bolivia, Brazil, Paraguay, and Uruguay—will gain improved access to EU markets for their agricultural exports, while the European Union will benefit from reduced levies on various products like automobiles, chemicals, and machinery.

The deal is anticipated to have positive impacts on the over 600,000 companies exporting numerous products to the Mercosur region, as stated by European Commission president Ursula von der Leyen.

“This is a win-win agreement that will deliver tangible benefits to consumers and businesses on both sides,” Von der Leyen declared in a statement.

The agreement is projected to save businesses €4 billion ($4.22 billion) annually and now requires finalization by all 27 EU members.

Initially, France had reservations about the pact, with European farmers concerned about potential market saturation from cheap beef and poultry imports, leading to challenges for local agriculture.

Livestock farmers have voiced concerns over their inability to compete with South American producers due to lower labor costs, fewer regulations, and larger farms. Nonetheless, EU officials have assured farmers that the agreement includes “robust safeguards to protect your livelihoods.”

The announcement was met with approval by the Federation of German Industries, representing 39 industry associations and 100,000 companies.

“The agreement presents a much-needed boost for the German and European economy, offering positive news for our companies,” commented Siegfried Russwurm, the group’s president, in a statement. “By eliminating significant trade barriers, European businesses stand to save around four billion euros annually in tariffs.”

This marks a significant development for both sides as negotiations date back to 1999. While progress was made in 2010 and 2019 concerning tariffs and environmental provisions, final agreements were elusive. Following concerns around deforestation in the Amazon, prospects for an accord seemed uncertain.

The latest agreement includes commitments to halt deforestation, maintain standards on animal health and food safety, and diversify supply chains.

Preparing for Trade Challenges

This achievement was momentous for Von der Leyen, especially as the EU faces potential trade conflicts with the United States.

Speaking at a press conference alongside her Latin American counterparts, Von der Leyen referred to the trade agreement as “a political necessity.”

“I understand that strong headwinds are approaching from the opposite direction, toward isolation and disintegration, but this agreement is our close response,” she stated. “We are sending a clear and powerful message. Amid an increasingly confrontational world, we demonstrate that democracies can rely on each other.”

With potential tariffs on Canada and Mexico looming, President-elect Donald Trump is expected to target the trade bloc next, according to Christian Dustmann, an economist at the Institute for the Economy and the Future of Work.

“This indicates that he will also utilize tariffs as a method to exert pressure on the EU,” Dustmann noted in a statement to The Epoch Times. “For instance, to align the EU with his anticipated actions against China. This would place Germany and the EU in a difficult position.”

In October, Trump vowed to pass the “Trump Reciprocal Trade Act” by holding the European Union accountable for not purchasing enough U.S. exports.

“Let me tell you: the European Union sounds so pleasant, so charming, right? All those charming little European countries coming together,” Trump remarked at a Pennsylvania rally.

“They don’t accept our cars. They don’t accept our agricultural products. They sell millions and millions of cars in the United States. No, no, no, they will have to pay a significant price.”

Trump proposed imposing 10–20 percent tariffs on all imports.

This wouldn’t be the first instance of Trump imposing trade levies on one of America’s leading trading partners.

In March 2018, Trump levied 25 percent and 10 percent tariffs on steel and aluminum imports from the EU. In retaliation, the bloc imposed 25 percent tariffs on over $3 billion worth of U.S. goods, including bourbon, corn, and Harley-Davidson motorcycles.

President Joe Biden eventually lifted these tariffs in October 2021, albeit with certain conditions.

The economic environment in Europe today differs significantly from Trump’s initial term in office.

In the previous year, Eurostat data showed almost zero growth in the eurozone’s economy.

The economic outlook in the region appears modest moving ahead. IMF economists forecast real GDP growth of 0.8 percent in 2024 and 1.2 percent in 2025 for the eurozone.

Andrew Kenningham, chief Europe economist at Capital Economics, envisages further economic weakness in the region, amid increased services inflation, slower wage growth, and a stabilization in the labor market.

“The eurozone seems to have lost some momentum and is projected to remain sluggish in the coming quarters,” Kenningham remarked in a note.

Dominic Dobryniewski, an economist at Oxford Economics, attributed Europe’s slowdown primarily to the effects of the European Central Bank’s monetary policy tightening between July 2022 and September 2023.

“The impacts of the interest rate hikes in recent years were somewhat masked by high backlogs in typically interest-sensitive sectors like capital goods, construction, and automotive sectors, which bolstered production despite declining new demand,” Dobryniewski outlined in a September note. “However, that support is now diminishing, and the true extent of the impact on interest-sensitive sectors is becoming more apparent.”

A recent Reuters poll of economists indicates the European Central Bank will reduce interest rates by 25 basis points at the next policy meeting and at least four more times in 2025.

Contrastingly, the IMF predicts growth of 2.8 percent in 2024 and 2.2 percent in 2025 for the U.S. economy, the world’s largest.

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