The free trade agreement between the European Union and the four South American Mercosur countries is beneficial for both economies. This is evident from the publication of the long-awaited impact assessment of the Mercosur agreement.
The Sustainability Impact Assessments (SIA) is an independent report prepared by the London School of Economics, commissioned by the European Commission. According to the SIA, the Mercosur agreement will have a positive impact on the economies of both trading blocs. The SIA notes that the agricultural sector in the EU will also benefit from the agreement.
According to a cautious estimate, the gross domestic product (GDP) could grow by 0.1% in the EU over the next ten years, and by 0.3% in Mercosur. A more ambitious scenario predicts double that: €15 billion for the EU countries and €11.4 billion for the South American countries over the same period.
The agreement will increase total EU exports by about half a percent, and imports by about one percent. However, the supply of beef from Mercosur will grow significantly faster, by 30% or even 64%. At the same time, meat production in the EU countries will shrink by 0.7% to 1.2%, respectively.
According to the impact assessment, European dairy exports would benefit significantly from lower import tariffs. In the conservative scenario, a dairy increase of 91% is expected; in the ambitious scenario, this is an additional 30 percentage points more.
The SIA also addresses the consequences for the environment, human rights, and the South American indigenous population. These issues are central to the criticism of the EU’s approach. According to the economic researchers, the agreement offers sufficient opportunities for improvements.
The European Commission has previously made it clear that it requires concessions from the Mercosur countries before the agreement can be submitted to the European Parliament for ratification.