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EU and Mercosur to form world’s largest free trade area

A freighter in the port of Puerto Deseado, Argentina

A freighter in the port of Puerto Deseado, Argentina , © Construction Photography

03.07.2019 - Article

Having reached consensus on an association agreement, South America and the EU, which already enjoy ties at many levels as partners sharing values, are set to draw even closer together.

Last Friday (28 June), the European Union and the South American bloc Mercosur (Mercado Común del Sur) reached a political agreement on an extensive and ambitious free trade section in their negotiations on an association agreement.

The entry into force of the envisaged agreement paves the way for the world’s largest free trade area with a population of around 780 million people. Over 90 percent of the existing tariffs between the two economic areas are to be phased out. This would save European companies around four billion euros in customs duties each year.

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High standards for consumers, guaranteed rights for workers

The future agreement will include the highest standards of food safety and consumer protection as well as specific obligations regarding workers’ rights. In particular, the parties will undertake to respect, promote and implement the core standards of the International Labour Organization (ILO). These guarantee, among other things, the freedom of association for workers, the right to collective bargaining on labour conditions and wages, as well as the prohibition of child labour and discrimination.

Common ambitions in the area of sustainable development

Furthermore, the agreement will contain an ambitious sustainable development chapter with binding regulations on nature conservation and environmental protection. This includes a commitment to the Paris Climate Agreement and the obligations stemming from it. The contracting parties have also reached agreement on a joint approach to tackling deforestation and promoting biodiversity. Compliance with these obligations will be ensured by a specific monitoring mechanism.

Implementing the new Latin America-Caribbean Initiative

With this agreement, South America and the EU, which already enjoy close ties as partners sharing values, are set to draw even closer together. Foreign Minister Heiko Maas also called for the existing partnership between the two continents to be intensified at the recent launch of his Latin America-Caribbean Initiative:

We are separated by the Atlantic. Yet we share similar values and interests, and we have close cultural ties. We believe in international rules that create legal certainty and promote economic growth and prosperity. We believe in international cooperation because our countries benefit from exchange and openness.

With this consensus on the association agreement, the goal of intensifying cooperation between Germany and the EU on the one hand and Latin America and the Caribbean on the other is being put into practice in an important area. The EU and Mercosur are thus also signalling their support for free, rules‑based trade and international cooperation.

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