Mercosur-EU Deal Must Consider South American Industrialization

On Tuesday, the Argentine politician Alejandro Karlen said that the trade agreement being negotiated between the Southern Common Market (Mercosur) and the European Union (EU) must allow for the industrialization of South America.

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"We are inclined to establish an agreement between Mercosur and the EU. But what is important for South America needs to be taken into account, and that means that Brazil cannot renounce its right to reindustrialize, just as Argentina cannot renounce being a country with a strong industry," said Karlen, who is also a Mercosur lawmaker.

"A deal is made so everyone wins. As Mercosur, what we want to discuss with Europe is not renouncing our interest in reindustrialization," he added.

Mercosur, which gathers Argentina, Brazil, Paraguay and Uruguay, reached a trade agreement with the European Union on June 28, 2019, after 20 years of negotiations, but the deal has yet to be ratified by the two sides.

"It is important to note that Europeans' growing concern for the security of their energy, raw materials and food supplies has brought about a change," said Karlen.

Each of the two regions has its comparative advantages, with Europe strong in the production of high-value goods, and South America rich in natural resources and basic manufactured goods, including agricultural and mineral products.

"But the European Union is clearly the more industrialized of the two regions, and any deal should reflect that status," said Karlen.

"If the partners... are very asymmetrical, the agreement must be too. The more developed partner has to make many more concessions, has to liberalize much more than the less developed region, which has to make many fewer concessions," he added.

The "special and differential treatment" provision of the World Trade Organization (WTO) represents one of "the fundamental principles of negotiations between developed and developing countries," Karlen said, adding that greater South American integration, through a common currency for example, would strengthen the region's negotiating hand.