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Conclusion of free trade agreement negotiations between Mercosur and EFTA

Joint Note from the Ministries of Foreign Affairs, Economy and Agriculture, Livestock and Supply

On Friday (23/08), in Buenos Aires, the negotiations for a free trade agreement between Mercosur and the European Free Trade Association (EFTA), a bloc made up of Switzerland, Norway, Iceland and Liechtenstein, were concluded. Negotiations between the two blocks were launched in January 2017 and concluded after ten rounds.

The conclusion of the agreement between Mercosur and EFTA is another result of the efforts to expand Brazil and Mercosur's network of trade agreements and follows the conclusion of the agreement between Mercosur and the European Union last June.

With a GDP of $ 1.1 trillion and a population of 14.3 million people, EFTA is the ninth largest player in world goods trade and the fifth largest player in services trade. With 29 other trade agreements already signed, the four countries of the bloc are among the highest GDP per capita in the world and make up a consumer market of great global relevance.

The Mercosur-EFTA agreement establishes tariff and regulatory deduction commitments, such as in the areas of services, investments, government procurement, trade facilitation, customs cooperation, technical barriers to trade, sanitary and phytosanitary measures, trade defense, competition, sustainable development. , rules of origin and intellectual property.

The agreement will expand markets for Brazilian products and services, promote increased competitiveness of the national economy by reducing production costs and ensuring access to high-tech inputs with lower prices. Consumers will benefit from access to a wider range of products at competitive prices.

With the entry into force of the agreement, Brazil will count on the immediate elimination by EFTA countries of the tariffs applied to the importation of 100% of the industrial universe. The agreement will also provide preferential access to the main agricultural products exported by Brazil, with the concession of free of charge, or through quotas and other types of partial concessions. New commercial opportunities will open for beef, chicken, corn, soybean meal, sugarcane molasses, honey, roasted coffee, fruits and fruit juices.

The commitments made will allow greater agility and cost reduction in the importation, exportation and transit of goods, besides contributing to the greater integration of the Brazilian economy to bilateral, regional and global value chains.

The agreement will ensure mutual access in service sectors such as communication, construction, distribution, tourism, transportation and professional and financial services. It will have transparency obligations in public procurement and will foster competition in state procurement, resulting in the optimization of the cost-benefit ratio of bids and the saving of public resources. The agreed commitments will give Brazilian companies access to the EFTA public procurement market, valued at about $ 85 billion.

Commitments to technical barriers to trade consolidate the agenda of good regulatory practices that Brazil has been implementing in recent years, while preserving the government's regulatory capacity.

According to estimates by the Ministry of Economy, the Mercosur-EFTA agreement will represent an increase in Brazilian GDP of US $ 5.2 billion over 15 years. It is estimated an increase of US $ 5.9 billion and US $ 6.7 billion in total Brazilian exports and imports, respectively, totaling a US $ 12.6 billion increase in Brazilian trade. A substantial increase in investments in Brazil of around US $ 5.2 billion is expected over the same period.

In 2018, the trade flow between Brazil and EFTA totaled US $ 4.5 billion, with exports of US $ 1.7 billion, mainly composed of gold, chemicals such as aluminum oxide, coffee, soy, meat and various food preparations. , and imports of $ 2.8 billion, with prominence in pharmaceuticals and organic chemicals, machinery and equipment, oil and gas, fish and crustaceans.

EFTA is a relevant partner of Brazil in services and investments. Service trade flows are estimated by the National Confederation of Industry at about $ 4 billion. Switzerland, EFTA's largest economy, is the fifth largest foreign direct investor in Brazil, according to the ultimate controlling shareholder, with a stock of US $ 24.4 billion in 2017, about 5% of the total. Swiss direct investments are concentrated mainly in the financial, insurance, manufacturing and trade sectors.

On the other hand, according to Central Bank data, Brazilian direct investment in the EFTA countries reached US $ 1.8 billion in 2017. Brazil's investments in EFTA are mainly in the financial, pulp and paper manufacturing sectors. mining.