In March this year, the XXVIIth round of the Mercosur-EU Bi-Regional Negotiating Committee took place in Buenos Aires, Argentina. In spite of the ups and downs of the South American economic bloc, since its creation, in December 1991, the Southern Common Market (Mercosur) has consolidated itself as one of the main axes of Brazil’s foreign policy and market for Brazilian products and services. Currently, as shown in Figure 1, Brazil’s trade proposals and agreements are linked to it. In addition to the country’s own relationship with the bloc, the implementation of a transatlantic trade agreement involving Mercosur and the European Union (EU) has consolidated itself as the most ambitious proposal of free trade for Brazil.

Two decades after signing the Framework Cooperation Agreement between Mercosur and the European Union, on December 15, 1995, the two regional economic blocs still have not been able to overcome their respective constraints and obstacles, in order to lead to the effective conclusion of a free-trade agreement. Signed on that date, the agreement came into force only in July 1999.¹ According to the document, the treaty sought to prepare the respective regions to establish the conditions for the creation of an interregional association involving trade, economy and cooperation.

In the commercial field, the agreement stipulates the promotion and diversification of trade in order to prepare the regions for a progressive liberalization which leads to the creation of a free trade area between the parties, considering issues that are delicate and in accordance with the World Trade Organization (WTO). Also according to the document, cooperation in the commercial area will take place without the exclusion of any sector, covering, in particular: (a) market access, trade liberalization (tariff and non-tariff barriers) and trade rules and regulations, such as restrictive trade practices, rules of origin, safeguards and special customs arrangements, for example; (b) the parties’ trade relations with third countries; (c) compatibility of trade liberalization with the rules of the General Agreement on Tariffs and Trade (GATT), of the WTO; (d) identification of sensitive products and priority products for the parties; (e) cooperation and exchange of information on services within the scope of their respective competences.

In the economic and cooperation fields, the agreement stipulates efforts to increase trade relations. In this sense, cooperation takes place in the business sphere, in the promotion of investments in energy, transport, environment protection, telecommunications and information technology, as well as in scientific and technological areas. Finally, institutional cooperation requires efforts in the areas of communication, information, culture, education and drug trafficking combat.

Since the Framework Cooperation Agreement was signed, in 1995, until it came into force, in 1999, the relations between the economic blocs went through a process of detachment. In this context, Mercosur’s great interest in consolidating itself as a customs union and increasing the productive integration of some sectors of Brazil’s economies within the bloc stands out. In addition, the role of the entire Free Trade Area of the Americas (FTAA) negotiation process should be highlighted within the international agenda of Brazil and the other Mercosur member countries. Across the Atlantic, the European Union was in the process of expanding its borders eastwards and sought to establish macroeconomic measures for the future implementation of the bloc’s single currency (CARVALHO, MIL, 2013)².

The dialogues are resumed at the European Union, Latin America and the Caribbean Summit, in June 1999, in Rio de Janeiro. It is at that point that the negotiations begin to be structured in committees and subcommittees, as well as in several working groups. In 2000, within the framework of the Bi-Regional Negotiations Committee, working groups were established to analyze issues related to goods, access to markets, customs procedures, investments, services, capital flows, intellectual property, government procurement, etc.

The Summit also took place in Madrid (2002), Guadalajara (2004), Vienna (2006), Lima (2008) and again in Madrid (2010). In the course of all these meetings, the major breakthroughs in the negotiations took place in 2001 and 2004. At the outset, the European Union presented a proposal for trade in goods, services and government procurement (CARVALHO, LEITE, 2013). In 2004, both sides submitted proposals for trade liberalization, covering up to 90% of goods and services in several sectors, with exceptions and observations pertinent to the agricultural sector. The discussions were resumed at the Madrid Summit, in 2010. On that occasion, an action plan for the activities of the 2010-12 period was established (CARVALHO, MIL, 2013). It is interesting to note that, similarly to the negotiations involving the United States and the European Union, a non-governmental forum was set up during this biennium to discuss the issues related to the creation of a free trade area between Latin America and the European Union: the European Union-Latin America and the Caribbean Foundation. It is noteworthy that it is within the framework of these meetings of organized interest groups of civil society that the consensus is sought about proposals that may be considered in the trade negotiations.

On January 26, 2013, the Mercosur-European Union Ministerial Meeting took place in Chile. In that meeting, a deadline was set for the blocs to prepare their respective proposals for an effective free trade agreement. In 2013, the convergence process of national offers within Mercosur began, aiming at consolidating a bloc joint offer, which was finally announced in 2014, in the Caracas Summit Communiqué. The exchange of offers should have taken place in the last quarter of 2015, as agreed at the Mercosur-EU Ministerial Meeting held in Brussels, in June of that year. Following the consent of the EU Council for the continuity of negotiations (November 2015), the exchanges finally happened on May 11 of the following year in the Belgian capital city. These negotiations dealt with trade in goods, government procurement, investments and services. In June 2016, the chief negotiators of the two blocs met in Montevideo, Uruguay, to discuss technical issues pertaining to the offers of the agreement. Five months later, in October, the first meeting was held in Brussels, after the blocs exchanged market access offers (BRASIL, 2017).³

Finally, in March 2017, the XXVIIth round of the Mercosur-EU Bi-Regional Negotiating Committee took place in Buenos Aires, Argentina.⁴ The working groups’ negotiations covered: trade in goods, rules of origin, trade and customs facilitation, technical barriers to trade, sanitary and phytosanitary measures, trade defense instruments, subsidies, dispute settlement, services, government procurement, intellectual property, trade and sustainable development, small and medium-sized enterprises and institutional matters.

The weight of the domestic market as a determinant variable of the Brazilian Gross Domestic Product (GDP) and the consolidation of not only Mercosur but also Latin America and the Caribbean as strategic areas for Brazil’s commercial insertion can be perceived as a challenge to the country’s interests in these negotiations. Graph 1 shows that over the last few years these regions have consolidated themselves as relevant markets for Brazilian foreign trade. In the last 16 years, the European Union has stood out as the main destination of Brazil’s exports, followed by China. The United States, which until 2009 was the second destination of Brazil’s exports, lost the position to the Asian giant and to Mercosur, which remained in the third position until 2014. Latin America and the Caribbean, excluding Mercosur, are important markets for Brazilian manufactured products and a potential target for the European bloc’s commercial strategy, which could be reached through a trade and investment agreement with Mercosur.

Although, singly, the trade flow of Mercosur member countries seems inexpressive, with the exception of Brazil, the aggregate data of the South American bloc draws attention. As can be seen in Table 1, in 2015, Brazil accounted for 69.91% of the bloc’s trade flow with the European Union. Argentina was the second economy. In the same year, Mercosur accounted for US$54.47 billion of the European bloc exports’ value. Out of this total, US$38.3 billion had Brazil as its destination.

In comparison with other destinations of the European Union’s exports, still in 2015, Mercosur consolidated itself as the 8th most important trade flow and 7th export market of the European bloc. Brazil, on the other hand, registered the 12th trade flow, the 15th export market and the 11th imports supplier. Table 2 shows, above all, the characteristics of the global triangular trade involving the European Union, the United States and Asia (especially China and Japan). In addition, the data illustrate the European Union’s trade strength as well as the challenges of Mercosur negotiations with the Europeans.

What can be inferred from all this long negotiation process for the establishment of an area of free trade and investment between Mercosur and the European Union seems to be the fact that some kind of agreement will be entered into. One may observe that, even with all the political and economic crises on both sides of the Atlantic, the negotiations are advancing at their own pace. It is worth mentioning that, even if the agreement is signed, the negotiations establish different schedules for adaptation to the conformities of the most varied economic sectors, aiming at the full implementation of the agreement between the parties. Mercosur and the European Union expect an agreement to be signed between the parties in 2018. However, it is necessary to emphasize that stability, or its absence (in politics and economy), is a determining variable in this negotiation dynamics.