The LAC region is a “strategic partner” of the EU with which we want to “join forces for a common future”, as outlined in the Joint Communication on EU-LAC relations (2019). Trade is a key component of the EU political agenda, and an important vector for the EU to promote its democratic values, rules and high standards. Since the early 2000s, the EU has concluded 11 bilateral and regional trade agreements with LAC countries (all countries except Mercosur, Bolivia and Venezuela). Just over the last decade, bilateral trade in goods with the region has increased by over 25%.
The EU is today a balance and counterbalance for US and China[1]’s influence in the LAC region, where it has considerable economic interests. An important feature of EU policy towards Latin America is its continuous support for regional integration and democratization, for which the EU offers a useful model, and it has done so also through trade agreements. EU-LAC trade agreements are market-opening tools but also tools for “good governance”. They help secure third-country markets for EU goods and services and level the playing field so that we can compete on a fair basis, including by solving trade frictions. Moreover, these agreements provide legal certainty and security for businesses and investors, promote sustainability standards and constitute useful platforms for engagement and coordination in areas of joint interest.
Trade remains a key driver for growth, innovation and competitiveness in both regions, and for our diversification strategy post-Covid. Latin America has played a role as a supplier of critical goods to the EU during the Covid-19 pandemic. This is especially true for pharmaceutical products, where EU imports from Mexico grew by €513 million in the first four months of 2020 – an equivalent of a 360% increase from 2019. Unfortunately, the Covid-19 crisis has hit Latin America harder than any other region of the world and the recovery remains fragile. Cooperation to address these challenges as well as the need to drive green, digital and inclusive recovery remain top of the EU agenda, and are the main themes of the recent EU-LAC Leader’s Summit 2021[2].
In our pursuit for “open strategic autonomy”[3], the EU needs to consolidate this strategic partnership by creating the necessary conditions for the ratification of the EU-Mercosur agreement and by concluding the modernized agreement with Mexico and Chile. This is a test for EU global ambitions. Bilateral trade with Mercosur represents 40% of EU trade with the region. China has already overtaken the EU to become Mercosur’s main trading partner. Clearly, the fires in the Amazon will not be extinguished by pulling out from this agreement. Concerns over deforestation are best addressed via engagement and cooperation, and this agreement provides a useful platform for that while contributing to the objectives of the Green Deal[4].
Finally, the EU is stepping up its global connectivity efforts, also seeking to offer viable alternatives to China's 'Belt and Road Initiative' in regions such as Latin America through the Global Gateway initiative. This initiative can contribute to closing the infrastructure gap that is holding back competitiveness in the region by bolstering investment in digital, climate, energy and transport infrastructure[5], and pave the way for greater regional integration to boost economic growth.
[1] Since 2017, China has overtaken the EU in Latin America and has become the main trading partner of major economies like Mercosur, Peru and Chile.
[2] See press release, EU-Latin America & Caribbean Leaders’ Meeting: Joining forces for a sustainable post-COVID recovery - Press release by Presidents Michel and von der Leyen - Consilium (europa.eu)
[3] See EU trade policy (europa.eu)
[4] See A European Green Deal | European Commission (europa.eu); also Forest strategy (europa.eu)
Overview of trade agreements in Latin America
First Generation trade agreements:
- Mexico (2000)
- Chile (2003)
New Generation trade agreements:
- Colombia (2013)
- Peru (2013)
- Ecuador (2017)
- Central America (2013): Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, Panama
Concluded negotiations on new FTAs:
- Mexico (modernised agreement)
- Chile (modernised agreement)
- MERCOSUR: Argentina, Brazil, Paraguay, Uruguay