Trade: German business wants breakthrough in South America agreement

The German economy is calling for a quick conclusion of the free trade agreement between the South American economic community Mercosur and the EU.

Trade: German business wants breakthrough in South America agreement

The German economy is calling for a quick conclusion of the free trade agreement between the South American economic community Mercosur and the EU. Companies and associations are counting on progress at the German-Brazilian Economic Forum on Monday in Berlin with Chancellor Olaf Scholz (SPD) and Brazilian President Luiz Inácio Lula da Silva.

“Many companies hope that the meeting between the two heads of government and their economics ministers will soon bring the final negotiations on the EU-Mercosur agreement to a positive end,” said Ingo Kramer, chairman of the Latin American Initiative of German Business (LAI). "We need the agreement this year. Otherwise there is a risk that it will become a never-ending story."

Conversations have been going on for years

The EU's talks with Brazil, Argentina, Uruguay and Paraguay have been going on for years. However, a fundamental agreement from 2019 will not be implemented due to ongoing concerns - for example about rainforest protection.

The head of foreign trade at the German Chamber of Commerce and Industry (DIHK), Volker Treier, said that a quick conclusion of the agreement would send a clear signal in the interests of the German economy: "The agreement not only opens up additional market opportunities for German companies in an important economic area, but also also offers new and major opportunities for supply chain diversification and raw material supply."

Traffic light coalition is behind the trade agreement

The Green party conference recently called for renegotiations of the Mercosur agreement against the will of the federal executive board in order to put an end to the "intensive mining of raw materials in the global south for consumption in the global north". The government coalition made up of the SPD, Greens and FDP, on the other hand, made it clear in the Bundestag a few days ago that it stood by the planned trade agreement.

The mechanical engineering association VDMA is also calling for the free trade agreement to be completed now. “Germany and the EU have a lot of catching up to do when it comes to cooperation with Brazil,” said Ulrich Ackermann, head of the foreign trade department at the VDMA. "The country has so far only had very little involvement in the international value chain, and market access to the EU is also limited."

The high customs barriers and technical trade barriers made the European export of machinery and equipment complex and expensive. “And we are in competition with China and the USA for market access in Brazil,” said Ackermann.

According to the VDMA, machines and systems worth 29 billion euros were delivered to the Mercosur countries in 2022, an increase of 26 percent compared to the previous year. Almost 30 percent of all machine imports come from China, which has almost doubled its share in the past ten years. The USA came in second place with a share of 14 percent, followed by Germany with 10 percent.

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