The EU-MERCOSUR Agreement

sustainability of regional integration;²⁸¹ one is the role of political leaders in their willingness for such success²⁸² and second having an undisputed strong leader presence among the group of countries (i.e. the case of Germany for the EU, even though it swings between a “problem solver” and a “too strong partner” as argued by some in the EU).

Brazil could do a similar job for MERCOSUR, yet Shams identifies “insufficiently implemented and coordinated economic policies and reforms as the main impediments to dynamic integration.”²⁸³ Then we may conclude that corresponding and coherent macro-economic policies need to be implemented in the southern regional integration processes. For instance the absence of supra-nationalism, and coordinated monetary policies impede regional monetary integration like that of the EU in other parts of the world.²⁸⁴

The fact is that political issues that encompass a great institutional impetus in the southern cone were not addressed in the Treaty of Asuncion since the participants worried that these issues could generate friction and derail the agreement. This would of course render a lesson in case of MENA which we will discuss in the next part of this dissertation. As aforementioned, the institutional weakness is a problem. Various observers have argued that MERCOSUR needs to do a better job of coordinating and regulating the macroeconomic policies of Member States if the organization is to meet its objectives.

Figure 4.1.4. European Union Trade with MERCOSUR Four Member Countries

political agreement for a balanced, ambitious and comprehensive trade agreement.²⁸⁵ Currently trade relations between the two blocs are based on an Inter-regional Framework Cooperation Agreement that was entered into force in 1999.²⁸⁶ Accordingly, the EU is considered as the number one trade and investment partner for MERCOSUR and it is also the second biggest trade in goods partner representing for example 20.1% of MERCOSUR’s total trade in 2018. Moreover, the total exports of the EU to the four MERCOSUR countries amounted to 45 billion Euros while MERCOSUR’s total exports to the EU were 42.6 billion Euros in 2018²⁸⁷ (Figure 4.1.4.).

As shown in the above Figure (4.1.4),²⁸⁸ the EU trade flows and its balance of trade in respect to MERCOSUR have modestly increased for the periods 2008-2018. It reflects a positive balance of trade for the EU from year 2012 on. The above mentioned agreement between the EU-MERCOSUR can consolidate such trend towards further enhancement of trade for the both blocs.

Despite all the advantages of the EU-MERCOSUR agreement, there are still some concerns within strong

285 http://ec.europa.eu/trade/policy/in-focus/eu-mercosur-association-agreement/

286 https://ec.europa.eu/trade/policy/countries-and-regions/regions/mercosur/

287 Ibid.

288 http://webgate.ec.europa.eu/isdb_results/factsheets/region/details_mercosur-4_en.pdf

agricultural sectors including France and Ireland thus leaving the deal at risk of being rejected or not ratified by the European Parliament. The above two countries in particular are worried of the surge that can come from South America over beef imports. Nonetheless, most leaders rather defend the deal because according to the European Commission, the deal has the potential to increase access to European firms that are making industrial products and cars which are currently subject to 35% tariffs. Accordingly, such firms would be able to compete for public contracts within the MERCOSUR countries. Likewise, in case of the four MERCOSUR member countries, the deal could be beneficial as it can increase their exports of beef, poultry, sugar, as well as other farm products.²⁸⁹

Moreover, the EU-MERCOSUR agreement can create a market for nearly 800 million people for goods and services amounting for almost one quarter of the world’s gross domestic products. It would also reduce tariffs, as duties on EU exports to MERCOSUR would be cut by 4 billion Euros a year. It is considered as the biggest and “first sweeping trade agreement” signed by MERCOSUR since its inception in 1991.²⁹⁰ The deal can eliminate tariffs on 93 percent of exports to the EU while granting “preferential treatment” for the remaining 7 percent. Plus, the increase access for the South American bloc to the European market is the big advantage. Slashing of duties on cars or car parts, chemicals, machinery and textile are considered as the most important wins for Europe in addition to improved market access for the European wine and cheese.²⁹¹

Overall, as depicted, in view of the high potential on trade between the two blocs, what can be concluded is that if the EU-MERCOSUR agreement is ratified, it would represent the largest trade agreement struck by both the European Union and MERCOSUR in terms of citizens involved. And this would be considered as a big fruitful benefit that can be reaped as the result of the two large integration blocs agreement thus setting a successful record for both European Union as well as the MERCOSUR member states. As indicated, such accords can not only expand the dimensions of the regional integration, but also they would directly contribute to the processes of global integration at large.

289 https://www.cnbc.com/amp/2019/07/25/eu-mercosur-trade-deal-at-risk-of-being-rejected.html

290 http://www.google.com/amp/s/amp.ft.com/content/a564ca96-99e7-11e9-8cfb-30c211dcd229

291 Ibid.