Mercosur-EFTA deal: South America, Europe forge new economic corridor with free trade pact

South America’s largest trading bloc, Mercosur, signed a trade deal with the four-nation European Free Trade Association (EFTA) on Wednesday. It is pertinent to note that the EFTA comprises Switzerland, Norway, Liechtenstein and Iceland. Meanwhile, Argentina, Brazil, Paraguay, Uruguay and Bolivia, as well as associate members Chile, Colombia, Ecuador, Guyana, Peru, and Suriname, are part of Mercosur.

Both sides emphasised that the deal has been a decade in the making and aims to establish a free trade area between the two blocs. It is significant since both groups cover nearly 300 million people and a combined gross domestic product (GDP) of more than $4.3 trillion (€3.64 trillion).

“Both sides will benefit from improved market access for more than 97% of their exports, which will boost bilateral trade and bring benefits to businesses and people,” the groups said in a joint statement.

What does the deal entail

The “comprehensive and broad-based” Free Trade Agreement (FTA) signed between the two groups covers services, investment, and intellectual property rights, among a range of other sectors. The FTA will also see the removal of customs duties that are designed to boost trade between the two blocs.

The deal was announced as Mercosur leaders gathered for a summit hosted by Argentine President Javier Milei in Buenos Aires. However, nothing is set in stone as the deal still needs to be approved by parliaments from countries in both blocs.

The talks between the two groups began in 2015 with negotiations formally opening two years later. Fourteen rounds of talks have been held since then. The agreement came after the European Union — of which the four EFTA nations are not members — sealed a similar deal with Mercosur late last year after 25 years of talks.

The deal, however, has not been ratified by the parliaments of all the EU member states. The agreement has also faced opposition from France and Spain, amid fears of unfair competition that could harm their agricultural sectors.