Czech Business Today

At the end of June, representatives of the European Union and Mercosur finalized the agreement in principle on a new trade agreement. The negotiations took an incredible 20 years to finalize, but the profit for companies on both sides should be worth the wait.

According to the European Commission, the deal should bring savings on duties worth 4 billion EUR yearly, which makes it the biggest EU free trade agreement so far. For comparison, the recent EU-Japan Economic Partnership Agreement concluded earlier this year should bring duties savings worth approximately 1 billion EUR. The EU agreement with Mercosur, consisting of Argentina, Brazil, Paraguay and Uruguay, creates a market of 780 million consumers and is part of a larger Association Agreement between the two partners.

One of the main focuses of the deal is on the agricultural and food sector as the deal reduces tariffs on wines, spirits, soft drinks, dairy products and chocolate, where the import duties to Mercosur countries varied from 20 to 35%. As usually, the EU put a lot of effort in safeguarding the Geographical Indications (GIs) and 350 of them will be legally protected from imitations. Overall, the deal will progressively reduce duties on more than 90% of goods going both from the EU to Mercosur and from Mercosur to the EU. Those include cars (current duty of 35%), car parts (14-18%), machinery (14-20%), clothing, textiles and leather shoes (up to 35%), chemicals (up to 18%) and others. But tariff duties’ reduction is only one part of the comprehensive deal. The EU pushed for keeping the high Sanitary and Phytosanitary standards covering food safety and animal and plant health.

Furthermore, the precautionary principle incorporated into the agreement ensures that public authorities can act to protect human, animal and plant health or the environment if there happens to be a possible risk. The agreement has a separate chapter focused on sustainable development where both sides commit to protect the environment, respect labour rights, promote responsible business conduct and also implement the goals of the Paris Climate Agreement. Thanks to the agreement, Mercosur countries will also open their government procurement markets to EU companies for the first time. The Confederation of Industry of the Czech Republic welcomed the agreement in principle that has been reached after such a long time. It is one of the biggest agreements of its kind in the whole world and it opens new markets for European companies.

The Confederation on Industry is certain that Czech goods and services will be able to penetrate Mercosur countries’ markets and find new customers there and therefore hopes that the process of finalization and ratification of the agreement will be as smooth as possible.