Mercosur and EFTA conclude negotiations for Free Trade Agreement

Less than two months after the conclusion of the Mercosur-European Union trade agreement, the Brazilian Ministry of Foreign Affairs and the EFTA Secretariat (European Free Trade Association) announced, on August 23, the conclusion of the Free Trade Agreement negotiations between the blocs.

EFTA (a bloc composed of Switzerland, Norway, Iceland and Liechtenstein) and Mercosur began negotiations in 2017, which had a total of ten negotiation rounds. The objective, according to the joint statement, is to expedite import and export procedures and to integrate the Brazilian economy in global value chains.

The Agreement establishes commitments in various areas, from tariff cuts and regulatory issues, to areas such as services, investments, government procurement, trade facilitation, customs cooperation, technical barriers to trade, sanitary and phytosanitary measures, trade remedies, competition, sustainable development, rules of origin and intellectual property. It is estimated that production costs in Brazil will be reduced, promoting the country’s competitiveness on the international trade.

As set out in the agreement with the European Union, Mercosur countries will have access to the EFTA public procurement market, valued at about USD 85 billion.
The Brazilian Ministry of Foreign Affairs has highlighted the concessions made the EFTA in the agreement:

“With the entry into force of the Agreement, Brazil will receive immediate exemption by the EFTA countries of the tariffs applied to imports of 100% within the industrial sphere. The Agreement will also provide preferential access to the main agricultural products exported by Brazil, through the granting of tariff-free access, or through quotas and other types of partial concessions. New commercial opportunities will open up for beef, chicken, corn, soybean meal, sugar cane molasses, honey, roasted coffee, fruits and fruit juices”.

It is expected that import tariffs for products from EFTA will be reduced or eliminated in up to 15 years. On the services side, the Agreement will ensure mutual access to areas such as communication, construction, distribution, tourism, transportation and professional and financial services, as well as ensuring commercial presence in other sectors.

According to estimates by the Ministry of Economy, the MERCOSUR-EFTA Agreement will represent an increase in Brazilian GDP of USD 5.2 billion over 15 years, an increase of USD 5.9 billion in Brazilian exports and USD 6.7 billion in imports. A substantial increase in investments of up to USD 5.2 billion in the same period is also expected.

The agreement is subject to national ratification procedures by the bloc countries, and will enter into force upon notification of ratification by the parties.

Demarest’s International Trade and Customs team is available for any further information or clarification on this matter.