THE AGREEMENT BETWEEN MERCOSUR AND THE EUROPEAN UNION
The necessary steps for its conclusion, signing and entry into force.
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by Félix Peña
March 2020
English translation: Isabel Romero Carranza
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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.
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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.
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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.
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