ifo Institute / EconPol Europe: Trade Expert Flach in Favor of Free Trade Agreement between EU and Mercosur

ifo trade expert Lisandra Flach recommends quickly concluding the free trade agreement between the EU and Mercosur in Latin America. “Ratification of the agreement is key for both Europe and Mercosur to broaden their supply chains and reduce dependence on China,” Flach says ahead of the EU-Latin America summit. China is now Mercosur’s most important trading partner, she adds, while the EU has become a great deal less important in recent years.

Between 2011 and 2021, exports from Mercosur (Argentina, Brazil, Paraguay, and Uruguay) to Europe fell by more than 25 percent. In contrast, China’s share of Mercosur’s total exports increased rapidly from 2 percent to 26 percent over the 2000–2018 period. On the import side, a similar picture is emerging: China’s share of Mercosur’s imports has also grown rapidly over the past 20 years, overtaking the EU’s share as early as 2019.

On July 17 and 18, the EU-Latin America Summit will take place. Negotiations on a free trade agreement between the EU and Mercosur have been going on for 20 years. Overall, the record since Mercosur was founded more than 30 years ago is mixed. “Successful ratification of the agreement with the EU could once again remind Mercosur member states of the benefits of being part of a large trading bloc, and it could spark renewed interest in addressing areas where integration currently falls short,” says ifo researcher Andreas Baur.