Find out what is cheaper after a free trade agreement between Mercosur and the European Union

This Friday (6) political leaders from Mercosur and the European Union (EU) announced a free trade agreement between the two economic blocs. Taking place during the Mercosur summit in Montevideo, Uruguay, the ceremony brought together representatives from the South American bloc and the European Commission. The treaty was signed after 25 years of negotiations between the two blocs.

The treaty ensures that 91% of imports from the EU are free from the Mercosur bloc. This could lead to a reduction in the price values ​​of products imported from Europe in Brazil.

The document establishes a 100% cut in industrial tariffs within ten years by the EU. Mercosur is expected to eliminate 91% of tariff and trade lines within 15 years.

Better prices and greater competition in Brazil

The sectors most benefiting from the trade agreement between the two economic blocs would be the automotive industry and agriculture, with a reduction in the value of cars, cheese, wine and olive oil.

The researcher at FGV Agro's Agribusiness Center, Felippe Serigatti, explained to CNN Brasil, although with the benefits of reducing the value of imported products in the country, the agreement will also bring competition to national products. According to Serigatti, the sector most affected by competitive prices will be dairy products.

“The wine part would be an example of increased competition in the Brazilian market, since Europe has a variety of drinks and a highly traditional reputation in the area.”, highlighted the researcher.

_{The ceremony brought together representatives from the South American bloc and the European commission (Photo: reproduction/Ricardo Stuckert/PR/Agência Brasil)}

Olive oil will become cheaper

With the signing of the treaty, olive oil will be the product with the lowest price reduction on the Brazilian market. This is because the country depends almost exclusively on imports of the product, since the largest producers are Portugal, Spain and Italy.

The item has seen a significant increase in value in the last two years, due to the drought that affects the main oil producers in Europe, reducing olive harvests.

Fundação Dom Cabral professor, Eduardo Menicucci, explained that the product would be capable of increasing trade flow between Mercosur and the EU. “The possibility of importing cheaper olive oil, due to the reduction in the tariff for the product's entry into Brazil. In principle, these products would arrive cheaper and increase trade flow between the two blocks.”, stated Menicucci.

Automotive industry

The automotive industry, mainly the luxury car segment, would benefit from the agreement, increasing the luxury car segment in Brazil. “High-end cars are highly taxed. Even though there are automakers in Brazil, many models are still manufactured outside the country. The change would be staggered, not overnight, but it is likely that there will be a price drop in the medium term”pointed out Eduardo Menicucci.

Another segment benefiting from the agreement would be services, mainly in the areas of consultancy and specialized labor, such as computing and information technology.

Featured photo: Flags representing the economic blocs Mercosur and the European Union (Reproduction/Comex)