We were still living in the previous century when the EU and five South American countries started negotiations on a trade agreement. Last week, more than 25 years later, the deal was finally sealed. The agreement should ensure that trade between the participating countries becomes easier. That is good news for trading companies, although there is also criticism of the deal. We explain the most important consequences of the agreement in this article.

The deal in short

The Mercosur deal includes the entire European Union and five South American countries: Brazil, Argentina, Paraguay, Uruguay and Bolivia. The deal covers 20% of the global economy and is therefore worth tens of billions of euros annually. The shared market consists of more than 700 million consumers. The agreement states that more than 90% of the current import duties will be lifted. Customs procedures will also be simplified and investments will be made easier. The EU will also receive preferential treatment for South American raw materials and there will be binding agreements on combating deforestation.

Joy and criticism

The Dutch business community has responded enthusiastically to the deal. They see plenty of opportunities for the economy and they recognise the importance of the agreements for the trading country that the Netherlands is. However, there is also resistance, particularly in politics. At the beginning of December, the House of Representatives voted against the deal out of fear of unfair competition. There are particular fears that European farmers will have a hard time because their South American colleagues have to deal with lower standards regarding animal welfare and manure policy.

Supporters of the deal point out that there will be restrictions on the amount of meat that may be imported without tariffs. The European Commission also emphasises that products that Europe imports must meet the same standards that apply here.

It is still questionable whether the Mercosur deal will ultimately come into effect. The European Parliament and the EU member states must first approve the deal. In France and Poland, the agreements are controversial, while Spain and Germany are very satisfied. The Dutch cabinet has never taken a position, and even now it is still unclear whether the government will support the trade agreement.

Political hurdles

If the Mercosur deal sees the light of day, this will definitely mean good news for Dutch trading companies. Trade with South America will then become a lot easier and cheaper. For the time being, however, it remains unclear whether the agreement will pass. Fear of unfair competition may throw a spanner in the works, despite the compromises that are already included in the agreement in this regard. Even if all concerns are removed, it will still take a long time before the deal has overcome all the political hurdles. It will therefore take at least a few more years before the Mercosur deal comes into effect.