Transatlantic Trade’s Huge Step Forward with EU-Mercosur Deal Should Awaken U.S. from its Latin American Siesta
Some years ago, the news of an EU-Mercosur trade agreement would have set off alarm bells in Washington policy circles. But in today’s United States, where trade liberalization has not been fashionable for years and increased tariffs are on the horizon, the news hardly reverberated in the U.S. capital. Coming after years of concerning inroads in trade and investment by China in Latin America, U.S. economic power and prestige in the region is slipping, which bodes poorly for U.S. economic security.
EU Commission President Ursula von der Leyen is seeking to secure reliable sources of raw materials and counterbalance China’s economic encroachments in the region, and in doing so has placed the EU at a distinct competitive advantage vis-a-vis the United States in the region.
Importantly, the agreement will not only remove tariffs the EU faces in these countries by more than US$4 billion (including for its autos, machinery, chemicals, pharmaceuticals and ICT products), but it will also offer the EU greater access to the region’s public procurement process, simplified customs procedures, and greater opportunities in financial services, telecom and transport. It gives the EU not only more advantageous access to critical minerals from the region but also opportunities for EU investment in local critical raw materials processing. There are even provisions for the EU to source green hydrogen from Mercosur, with plans to facilitate Mercosur’s “green and digital transition.” Plus, the agreement incorporates sustainability initiatives and measures to ensure responsible supply chains by addressing human rights issues.
EU approval of the agreement will no doubt encounter political pushback domestically, and the pact could also face opposition in Mercosur - but if the immediate and strong positive reception from Argentina’s business leaders in industry, agriculture and financial services is any indication - the agreement could see smooth sailing in the bloc.
The more problematic question is, how much longer will the U.S. be on the outside looking in? Hopefully, the EU-Mercosur deal will awaken U.S. leaders from a prolonged siesta. We must build something larger than the Americas Partnership for Economic Prosperity (APEP), which admirably strengthened opportunities for SMEs and entrepreneurs, improved supply chain resilience by harmonizing technical standards and advanced semiconductor production in the region. But APEP is a snoozer compared to this bold move by the EU, and Congress’ bipartisan Americas Act to expand the USMCA is a distant dream. The EU-Mercosur agreement represents smart outreach to a region with significant resources and human potential. Ojalá the U.S. will pursue ground-breaking economic partnerships in the region and make our country stronger, safer and more economically secure.
