Free Trade Agreements With Brazil

Free Trade Agreements With Brazil

At the same time, Brazil is negotiating with India and South Africa, with which it is the largest economic bloc of the southern countries within the IBSA, creating tensions within Mercosur. A constructive outcome to this solution – although unlikely given the Argentine government`s anti-trade stance – would be to transform Mercosur into a free trade agreement rather than a customs union. A free trade agreement can maintain the current zero tariff for domestic trade, while providing members with flexibility in negotiating their own trade agreements with other countries. The United States should follow this path by actively pursuing a free trade agreement with Brazil, which would have the added benefit of diversifying its supply chains. I hope that there will be a more open and flexible bloc that will give the citizens of Argentina, Brazil, Paraguay and Uruguay hope for a more prosperous future. Both of these situations would be a disaster for the Argentine economy. One of the cornerstones of industrial production that is still inefficient is the ability to sell to Brazil at zero tariffs, while competitors have to pay for THE ECTs. If Brazil signs many trade agreements, Argentine companies will be subject to stiff global competition in the Brazilian market, without having the advantage of accessing new markets opened by trade agreements for Brazilian companies. The United States engages with Brazil on trade and investment issues through a series of initiatives. If Brazil, Paraguay and Uruguay decide to continue their ambitious trade negotiations and sign new free trade agreements, but Argentina does not accompany them, there will inevitably be a point on which the three countries will have to decide whether they want to break Mercosur or if they want to make it more flexible. For example, if a trade agreement is concluded with Canada, but Argentina remains outside the agreement, it would mean that Canada`s exports to Brazil would be preferential tariffs, but Canadian exports to Argentina would still face the high level of common tariff (CET) that all imports to Mercosur must pay today. The more Mercosur`s trade agreements sign that Argentina does not comply, the less meaningful the CET is. In fact, the customs union would be dismantled.

To do so, either the Mercosur rules must be relaxed so that members can sign trade agreements without unanimity, or the founding treaty of Asuncion must be violated, which means the end of Mercosur. The Brazilian market is heavily protected with an applied tariff of 13.5%. When Mauricio Macri was elected president in 2015, there was a glimmer of hope for Mercosur to finally open up. Macri has been at the forefront of reviving external negotiations, which were concluded with an agreement between Mercosur and the European Union after more than 20 years of stalled negotiations.

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