EU, Mercosur agreement ‘one of the most important trade deals of all time’ – but where does it leave the UK?

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After two decades of negotiation and amid a growingly protectionist political backdrop, the EU and South American member states of the Mercosur economic bloc have signed a trade deal that by some metrics is the largest ever agreed. 

The deal, which will see tariffs cut or removed on goods and services between both countries, will deliver cheaper imported products for consumers and boost export opportunities & profitability for businesses within the two zones. 

The market that will be created as a result of the deal will cover 800 million people – the largest trade deal ever signed in terms of population. 

The new agreement comes a matter of months after another of the world’s largest trade deals was agreed, between the EU and Japan, which covers a third of global GDP and 635 million people. 

The EU agreement with the Mercosur bloc, which includes Argentina, Brazil, Paraguay and Uruguay, will create a new business and export haven where firms can seamlessly trade, consumers can access cheaper products and economic growth can flourish, at a time where the US and China are locked in a tariff war. 

Since 2016, the EU has also penned agreements with Canada and Mexico with the pace of discussion ramping up since Donald Trump’s arrival as US President. 

EU trade commissioner Cecilia Malmstrom said of the deal: “They have been long negotiations – tough, difficult, and at least I have said many times ‘we are almost there’. 

“Now we are. This is a landmark agreement.”

Where do recent EU trade agreements leave the UK?

The answer depends on the type of exit that the UK can agree amongst itself, and then ratify with the EU member states. 

A no deal exit would essentially lose the UK and its businesses free trading access to the EU, Japan and now also the Mercosur trading blocks. 

And lack of access also results in a lack of competitiveness. South America affords some of the hottest growth markets for businesses worldwide, but EU companies will be more competitive sitting inside a trade zone than the UK sat outside looking in. Companies and organisations within the Mercosur block will also invest more readily in EU countries, including setting up of new factories, distribution centres and offices. 

Read more: UK carmakers warn of £50k a minute hard-Brexit bill as Germany reiterates desire for agreement

Indications of business intent are already in action, too, with both Nissan and Honda announcing plant closure and production cuts in the UK and moves back to Japan – which now has tariff-free access to the critical EU car market. 

And the EU – Mercosur deal also highlights just how much time it takes to negotiate, agree and ratify such large scale trade agreements, the golden goose flaunted as the great opportunity for UK businesses once the EU departure has been finalised.

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