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  Félix Peña

INTERNATIONAL TRADE RELATIONS NEWSLETTER
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THE AGREEMENT BETWEEN MERCOSUR AND THE EUROPEAN UNION
The necessary steps for its conclusion, signing and entry into force.


by Félix Peña
March 2020

English translation: Isabel Romero Carranza


 

Once the legal review is completed, the Mercosur-EU agreement should be in a position to move forward to the next step, which is its signing. In the case of Mercosur, due to the relevance of the agreement, this would involve the signing by the Presidents of the four member countries, perhaps at their next Summit in Asunción. However, it seems premature to anticipate that this will actually happen.

Before this step is taken, there should be evidence that the four countries share the idea that the agreement be signed as finalized by the negotiators or that they agree to introduce some modifications, and that this is also accepted by the EU.

After signing the agreement, the next step in Mercosur would be its approval by the national parliaments of each country and the ensuing ratification. Once ratified by the four Mercosur member countries and by the EU, the agreement would enter into force.

Taking into account the text of the Treaty of Asuncion, it could be legally questionable if the entry into force were to be achieved without the signing and ratification of the four member countries.

There are at least three possible scenarios regarding the future of formal relations between Mercosur and the EU that depend on the result of the process of signing, parliamentary approval and effective entry into force of the bi-regional agreement.

The first scenario would be one in which the pending steps are taken as planned and, therefore, the concluded agreement becomes fully effective. The second scenario would be one in which not all the Mercosur countries sign and ratify the agreement, that is, they do not accept it as concluded in the negotiating process, or that this happens on the European side. In this case, the agreement might not enter into force. Finally, the third scenario would be one in which, for different reasons, the agreement between Mercosur and the EU does not enter into force and is even abandoned.

The three scenarios should also be evaluated in the perspective of other negotiating fronts of Argentina and its Mercosur partners. Among others, the negotiations that will have to be undertaken globally to avoid a collapse of the WTO, or to achieve an alternative framework of rules and institutions that help maintain a global trading system based on rules. Here we must also include the negotiations for the development of regional and trans-regional spheres that facilitate the expansion of trade and investment.


On June 28, the negotiation of the commercial pillar of the bi-regional agreement between Mercosur and the European Union was concluded. Since then, the agreed texts corresponding to this part of the negotiations have been published. The full text should also include the political and cooperation pillars, as well as the general provisions of the agreement, among others, those related to the ratification process and its entry into force.

Given the plurality of languages of both regions, but in particular of the EU, in order to take the next steps it will be necessary to finish the revision of the texts in all the official languages.

Once the legal review that is currently underway is completed, the agreement should be in a position to move forward to the next step, which is its signing. Due to the relevance of the agreement in the case of Mercosur, this would involve the signing by the Presidents of the four member countries, perhaps at their next Summit in Asunción. However, it seems premature to anticipate that this will happen. Before this step is taken, there should be evidence that the four countries share the idea that the agreement be signed as finalized by the negotiators, or that they agree to introduce some modifications and that this is accepted by the EU. It must be taken into account that in two of the Mercosur countries there has been a change of government after the negotiation process was concluded.

After signing the agreement in Mercosur, the following step would be its approval by the national parliaments and its subsequent ratification. It is a step that should require an in-depth debate on the commitments that countries will make when the agreement is effectively in force.

Once signed and ratified by the four Mercosur member countries and by the EU, the agreement will enter into force. If we take into account the text of the Treaty of Asunción, it could be legally questionable that such validity be achieved without the agreement having been ratified by the four member countries. As we have pointed out on previous occasions (see for example the editions of February 2020, July, September and December 2019 of this newsletter), this would seem to be the case if the provisions of articles 1 ("common external tariff") and 2 ("reciprocity of rights and obligations") are considered. In other words, because it is a customs union, and due to the role of the common external tariff as a central instrument of Mercosur.

At least three scenarios are imaginable regarding the future of formal relations between Mercosur and the EU depending on the result of the process of approval and effective entry into force of the bi-regional agreement. They are scenarios with clear implications for the existential dimension of Mercosur (why the member countries have decided to associate) and for its methodological dimension (how the joint work between the associated countries is developed). Each scenario would also have clear political and economic implications in the future of the relations among the Mercosur countries and with those of the EU.

The first scenario would be one in which the pending steps are taken as planned and, therefore, the agreement that is concluded becomes fully effective. It is a scenario that may still require a period of approximately two years, or even more, to materialize.

The second scenario would be one in which one or more Mercosur countries do not sign or ratify the agreement, that is, they do not accept it as it was concluded in the negotiating process. This same situation could happen on the European side. In this case, the bi-regional agreement may not enter into force. However, in the case of Mercosur, could the agreement enter into force if, for example, just one of the member countries refused to sign or ratify it?

With regard to ratification -not so with regard to signing- it has been pointed out that the Mercosur countries have agreed to a process of bilateral validity, that is, the agreement would not apply to the country that has not ratified it, or until it decides not to do so.

Although the text of this agreement has not yet been published, the so-called bi-lateralization could have consequences that go far beyond the bi-regional agreement and that would have a deep impact on the existential dimension of Mercosur and the relations between its member countries.

Despite the fact that the bi-regional agreement with the EU has very different scopes, it could eventually be pointed out that the bilateral entry into force of a free trade agreement has precedents in Mercosur. It is included, for example, in the free trade agreement between Mercosur and Israel, and also in the agreement concluded, but not yet ratified, between Mercosur and the EFTA. But if that same procedure were applied to the Mercosur-EU agreement, wouldn´t the Mercosur customs union be in fact transformed into a free trade area? And, wouldn´t the trade preferences agreed in the Treaty of Asunción be liquefied? This is not a minor issue due to the legal, political and, above all, economic implications.
Finally, the third scenario would be one in which the bi-regional agreement between Mercosur and the EU does not enter into force and is even abandoned, as it happened not long ago with the so-called Trans-Pacific Partnership, in which the US participated.

In this hypothetical case, it could eventually be necessary to resort to the 1995 bi-regional framework cooperation agreement still in force, which was the framework for the negotiations concluded on June 28. This could mean reopening the entire negotiating process and undoubtedly missing an opportunity that was considered as positive by the two regions during almost thirty years.

The three scenarios must also be evaluated in the perspective of other negotiating fronts in Argentina and the Mercosur partners. We are referring, among others, to the negotiations that will have to be undertaken globally in order to avoid a collapse of the WTO, or to achieve an alternative framework of rules and institutions that help maintain a global trading system guided by rules. Here we must also include the negotiations for the development of regional and trans-regional spheres that facilitate the expansion of trade and investment, among others, with the Pacific Alliance, the US, Canada, China, the United Kingdom, Japan, India and the ASEAN.


Recommended Reading:


  • Allende, Isabel, "Largo Pétalo de Mar", Sudamericana, Buenos Aires 2019.
  • Baltensperger, Michael; Dadush, Uri, "The European Union-Mercosur Free Trade Agreement: prospects and risks", Bruegel, Policy Contribution, Issue nº 11, September 2019, en https://www.bruegel.org/.
  • Bell, Daniel A.; Pei, Wang, "Just Hierarchy. Why Social Hierarchies Matter in China and the Rest of the World", Princeton University Press, Princeton & Oxford 2020.
  • Caramuru de Paiva, Marcos; Lins, Clarissa; Ferreira, Guilherme, "Brasil - China. O Estado da Relacao, Belt and Road, e Licoes para o Futuro", CEBRI, Rio de Janeiro, Setembro 2019, en https://www.cebri.org/.
  • CEPAL, "El rol del Mercosur en la integración regional", Boletín de Comercio del Mercosur, Santiago 2018, en https://www.cepal.org/.
  • CEPAL, "Perspectivas del Comercio Internacional de América Latina y el Caribe. El adverso contexto mundial profundiza el rezago de la región", CEPAL-Naciones Unidas, Santiago de Chile 2019, en https://repositorio.cepal.org/.
  • Coggan, Philip, "More. The 10.000 Year Rise of the World Economy", Profile Books, London 2020.
  • Esteban, Mario; Otero-Iglesias, Miguel (editores), "Europe in the Face of US-China Rivalry", Real Instituto Elcano, A Report by the European Think-tank Network on China (ETNC), January 2020, en http://www.realinstitutoelcano.org/.
  • Herlihy, David, "The Black Death and the Transformation of the West", Edited and with an Introduction by Samuel K.Cohn Jr., Harvard University Press, Cambridge and London 1997.
  • Kelly, John, "The Great Mortality. An Intimate History of the Black Death, the Most Devastating Plague of All Time", Harper Collins e-books, New York - London 2006.
  • Mesquita Moreira, Mauricio; Stein, Ernesto (editores), "De Promesas a Resultados en el Comercio Internacional. Lo que la integración global puede hacer por América Latina y el Caribe", BID, Washington 2019, en https://flagships.iadb.org/.
  • Nye, Joseph S. Jr., "Do Morals Matter. Presidents and Foreign Policy from FDR to Trump", Oxford University Press, Oxford - New York 2020.
  • OCDE, "Estudios Económicos de la OCDE", OCDE, Paris, marzo 2019, en https://www.oecd.org/.
  • Serbin, Andrés, "Eurasia y América Latina en un mundo multipolar", Icaria Editorial, Barcelona 2019, en http://www.cries.org/.
  • Ochoa, Raúl, "Argentina-Brasil: incierto escenario para una relación indispensable", diario "Clarin" lunes 17 de febrero 2020, en https://www.clarin.com/.
  • Rosales, Osvaldo, "El Sueño Chino. Cómo se ve China a sí misma y cómo nos equivocamos los occidentales en interpretarla", Siglo XXI editores - CEPAL, Buenos Aires 2020.
  • Taylor, Frederick, "Dresden Tuesday, February 13, 1945", Harper Collins e-book, 2004.
  • Tremolada Àlvarez, Eric (editor), "Gobernanza, cooperación internacional y valores democráticos comunes", IUS COGENS - Universidad Externado de Colombia, Bogotá 2019.
  • Zweig, Stefan, "El mundo de ayer. Memorias de un europeo", Acantilado, Barcelona 2011.
  • Zweig, Stefan, "The World of Yesterday", Plunkett Lake Press, 2011.

Félix Peña Director of the Institute of International Trade at the ICBC Foundation. Director of the Masters Degree in International Trade Relations at Tres de Febrero National University (UNTREF). Member of the Executive Committee of the Argentine Council for International Relations (CARI). Member of the Evian Group Brains Trust. More information.

http://www.felixpena.com.ar | info@felixpena.com.ar


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