The Southern Common Market (Mercosur) and the European Free Trade Association (EFTA) have officially concluded negotiations for a free trade agreement (FTA) during the Mercosur summit in Buenos Aires on Wednesday. This agreement, a decade in the making, establishes a free trade zone encompassing nearly 300 million people with a combined GDP exceeding $4.3 trillion.

The FTA aims to boost trade and strengthen economic ties between the two blocs by granting improved market access for over 97% of their exports. This will lead to increased bilateral trade and offer significant advantages for businesses and individuals within both Mercosur and EFTA member states.

Mercosur includes Argentina, Brazil, Paraguay, Uruguay, and Bolivia (in the process of becoming a full member). The EFTA comprises Iceland, Liechtenstein, Norway, and Switzerland, which are not part of the European Union.

Key Aspects of the Agreement

The Mercosur-EFTA FTA is a comprehensive agreement covering various aspects of trade and economic cooperation:

• Trade in Goods and Services: The agreement encompasses trade in both goods and services, reducing tariffs and simplifying import/export procedures. Customs duties will be removed to further facilitate trade between the blocs.
• Investment: The FTA includes provisions related to investment, aiming to create a more stable and predictable environment for investors in both regions.
• Intellectual Property Rights: The agreement addresses intellectual property rights, providing a framework for protecting and enforcing these rights within the free trade area.
• Government Procurement: Mercosur companies will gain access to EFTA's $85 billion public procurement market, creating new opportunities for businesses in South America.
• Competition: The FTA includes regulations concerning competition to ensure fair and open markets.
• Rules of Origin: The agreement establishes rules of origin to determine the country of origin of goods, which is essential for applying preferential tariff rates.
• Trade Defense: The FTA includes mechanisms for addressing unfair trade practices, such as dumping and subsidies.
• Sustainable Development: A chapter on trade and sustainable development is included, demonstrating a commitment to promoting environmentally and socially responsible trade.

Benefits and Expectations

The Mercosur-EFTA FTA is expected to bring several benefits to both regions:

• Increased Market Access: Both blocs will enjoy improved market access for their exports, leading to increased trade and economic growth.
• Reduced Trade Barriers: The agreement will remove trade barriers, such as tariffs and customs duties, making it easier and cheaper to trade between the two regions.
• Greater Predictability and Legal Certainty: The FTA will provide greater predictability and legal certainty for businesses engaged in trade and investment between Mercosur and EFTA countries.
• New Business Opportunities: The agreement will create new business opportunities for economic agents in both regions, including small and medium-sized enterprises (SMEs).
• Strengthened Economic Ties: The FTA will strengthen economic ties between Mercosur and EFTA, fostering closer cooperation and collaboration.

Next Steps

While the negotiations have concluded, the agreement still requires parliamentary approval and legal review in each of the signing countries. Swiss Secretary of Economic Affairs Helene Budliger Artieda has stated that the deal is a "complete priority for the EFTA countries". The Norwegian delegation anticipates that the ratification process will likely be completed in the first semester of 2026. Brazilian Foreign Minister Mauro Vieira expressed Brazil's commitment to moving "as quickly as possible" to finalize the deal, with hopes of doing so during the second half of 2025 when Brazil assumes the rotating Mercosur presidency.

Historical Context

Talks between Mercosur and EFTA began in 2015, with formal negotiations commencing in 2017. Although an agreement was announced in 2019, it did not progress due to disagreements on environmental issues. Negotiations were relaunched in 2024, with Argentina leading for Mercosur and Switzerland for EFTA.

Comparison with Mercosur-EU Deal

The Mercosur-EFTA FTA runs parallel to Mercosur's efforts to finalize a trade deal with the European Union, which was agreed upon in principle in December 2024. However, the Mercosur-EU agreement has faced pushback from some EU member states, such as France, and still needs ratification by all 27 EU member states. According to sources, the Mercosur-EFTA deal is not expected to face similar resistance from EFTA countries.