EU-Mercosur trade agreement: one billion market for fashion

Latin America opens its borders to the world. After twenty years of negotiations, with the signing last summer of the trade agreement between the European Union and Mercosur, a 780 million people market is created, which accounts for 25% of the world’s spending. For European fashion, this means the opening of a market that generates around one billion euros per year.

After the agreement, the European Union has become the main commercial and investment partner of Mercosur countries (integrated by Argentina, Brazil, Paraguay, Uruguay and Venezuela). Political dialogue, cooperation and free trade are the three fundamental pillars of the agreement. Trade between the two regions represents 100 billion euros per year.

Until now, Mercosur’s countries had an average tariff rate of 12%, almost double of other countries that belong to the Organization for Economic Cooperation and Development (Ocde). The treaty means tariff elimination of about 90% of the products that are traded between both regions, while the remaining 10% will have reduced taxes.

Until now, Mercosur regions had an average tariff rate of 12%

Tariff elimination is a boost for fashion business of the countries of the European Union, which in the last year have cut their sales to Mercosur members. In 2018, the countries of the European Union exported fashion products to the territories of Mercosur worth 1 billion euros, 5.4% less. In 2017, sales to Mercosur coming from European countries increased by 8.9%, while in 2016 the sector shrunk its exports by 9.8%.

France, Italy and Germany are the four European countries that export the most fashion to the Mercosur territories. In 2018, the French market sold fashion goods to Latin American region worth 282 million euros, a year-on-year increase of 20.9%.

Last year, Italy and Germany, for their part, exported fashion to Mercosur for 164 million euros and 141 million euros, respectively. However, in 2018 these markets cut their sales to Mercosur by 6% and 18%, respectively. The economic impact of this agreement is likely to begin to be noticed in 2021, according to the EU-Mercosur trade agreement, opportunities for Latin America report, by Euromonitor.