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What do we know?
- The
Mercosur
and the
European Union
They announced a free trade agreement whose negotiations lasted more than 20 years. This happened at the last technical meeting in Brussels in late June, parallel to the G20 summit in Japan. - The agreement involves the gradual elimination of tariffs for 92% of Mercosur's imports and will apply preferential access (quotas or other terms) to 7.5%. In return, Mercosur will eliminate rates by 91% and will leave excluded 9% of products considered "sensitive" for the region.
- The elimination of the tariffs will be unequal between the blocks. Mercosur will remove rates within 15 years (with variations depending on the product), while the EU will do so within a maximum of 10 years.
- The agreement aims to remove barriers to the import of services, so that Argentina is competing on an equal footing in Europe, which imports 800,000 million euros per year. year. Physical inspections of imports will be reduced and Argentine companies will be able to participate in purchases or leases with the European authorities. Every year, the continent makes purchases corresponding to 16% of European GDP. It also provides for a rationalization of the flow of investments.
- The full implementation of the pact (which, in addition to trade, includes areas such as human rights) will represent the opening for Mercosur of a market of 500 million people. The new free trade zone will have 800 million individuals and will be one of the largest in the world.
- The announcement has generated partial support from the business community, but critics and doubts from sectors that will have to adapt their activities so as not to be harmed or, in the worst case, to disappear. Macri will try to get the election income from the announcement.
What are the doubts?
- The most unknown aspect of the agreement is precisely the agreement. The blocs reached a political agreement in Brussels, but it remains to define the legal aspects of the trade pact, as well as the translation into more than 30 languages that constitute the blocks, before the final text is known. The process may take more than six months.
- The implementation of the agreement, once overcoming the bureaucratic and institutional obstacles, has awakened another unknown: under what conditions will be Argentina when the pact comes into effect. Last week, meeting with Mauricio Macri, businessmen stressed the need for the country to reduce the deficit and inflation and move forward in labor market reforms, public finances and pensions.
- The unions also expressed their concern, asked to know the pact in detail and became aware of the possibility of the government starting the labor reform, which is already causing concern in the trade union movement.
- The parliamentary procedure in Argentina also raises a question mark. The treaty must be approved by both houses of Congress and this vote should not take place until next year or in 2021, when the configuration of Parliament will be different from the current one.
- In addition, doubts remain about the role that France will now play. The historical sensitivity of the agricultural sector of this country has led the spokesman of President Emmanuel Macron to affirm that France was not yet ready to ratify the agreement and that the details of the pact had not been reached. not yet evaluated. The country was one of the most reluctant to advance negotiations in recent years because of the pressure exerted by the agricultural sector, which seeks to prevent the mbad arrival of Mercosur products.
Which sectors will be affected and which ones will need to be adapted?
- The Argentine agricultural sector will be the most advantaged, while the industrial sector must be converted to ensure its competitiveness or existence.
- Mercosur has negotiated that the elimination of customs duties can take up to 15 years for the most sensitive products, such as those of the textile industry, the automotive industry and the United States. l & # 39; furnishings. The local industry will be exposed to competition from European imports, but not in the short term.
- In the case of vehicles, the total elimination of customs duties takes 15 years, but the first reduction will only be applied seven years after the entry into force of the agreement.
- For shoes and clothing, the reduction will be made in eight years, with the exception of shoes for which the term will be 15. All products worth less than 35 euros must be manufactured entirely in the region. Above this value, parts can be imported.
- For chemicals, the price will be zero within four years. Today, the rates range between 5% and 7.7%. The tax on auto parts, which varies between 10 and 20%, will be eliminated within seven to ten years. The machines have a tariff of 4%, which will be abolished within a period not exceeding eight years.
- The agricultural sector will be the biggest beneficiary. Mercosur will be able to export products currently subject to duties of up to 157%, such as fruit, or up to 104%, like animals.
- The agreement provides for the elimination of tariffs on 81.7% of food exports and the granting of quotas or fixed preferences at 17.7%. Among those whose tariff reduction will reach 0% are soya flour and beans, industrial oils, infusions, spices, fish products and fruits.
What can we expect for the future?
- Following the announcement, the agreement began a phase of legal revision to define the final text.
- Once this step is completed, the text must be submitted to a legislative vote in each of the Mercosur member countries and in the European Parliament, where a qualified majority vote is required. The agreement must be approved in Europe by 16 of the 28 states representing more than 65% of the bloc's population. This process can take up to two years.
- It is only after the vote that the deadlines for the tariff reduction will begin. The agreement will fully govern 15 years after its entry into force, to which must be added the previous bureaucratic procedures.
- The trade agreement should give new impetus to the negotiations already under way between Mercosur and other countries, such as Singapore, South Korea, Canada or the European Free Trade Association ( EFTA, for its acronym in English). . In addition, the government announced that the possibility of negotiating a free trade agreement with the United States was under study with Brazil. An badociation with China has also made progress, Foreign Minister Jorge Faurie told LN +.
- The agreement with Europe will be part of the government's speech to the presidential campaign. Mauricio Macri has already begun to refer to the understanding – one of the foreign policy objectives of his administration – during public events. Last week, for example, said the pact "opens up a panorama of growth for the country," saying that the Argentines are "better" when they compete and criticize the Kirchner, to blame him for his failure. Having closed the economy. "Everyone has fallen in love with Argentina," said Macri, who recalled the G20 summit that was held in Buenos Aires at the end of 2018.
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