Free Trade Agreement between EFTA and MERCOSUR

General Information
In August 2019, member states of the European Free Trade Association (EFTA – Iceland, Liechtenstein, Norway and Switzerland) and of MERCOSUR (Argentina, Brazil, Paraguay and Uruguay) concluded in substance the negotiations on a comprehensive Free Trade Agreement (FTA). Besides economic gains, what moved both sides to reach a consensus was their belief that free trade is essential to guarantee in open society and the wellbeing of their peoples.

The EFTA-MERCOSUR Agreement covers trade in goods, trade in services, investment, intellectual property rights, government procurement, competition, sustainable development, and legal and horizontal issues including dispute settlement.
MERCOSUR is an important trading partner for EFTA and will allow EFTA companies to benefit from privileged access to a market of over 260 million consumers. Current EFTA bilateral trade in goods with MERCOSUR totalled €5,8 billion in 2018 (source: EFTA), with EFTA exports worth €3,7 billion and MERCOSUR imports for €2,1 billion. The new Free Trade Agreement will allow EFTA exporters to gain from progressive tariff cuts and ensure a level playing field with its main competitors in this important market. Norwegian companies with interests in Brazil will reap considerable benefits.

Negotiations towards the comprehensive FTA were preceded by a Joint Declaration on Cooperation, signed in December 2000, under which an exploratory dialogue with a view to possible future trade negotiations was initiated in March 2015 and concluded in January 2017. This was followed by the launch of negotiations with a first round in June 2017 in Buenos Aires, Argentina.
The agreement is now going through the final phases of a necessary legal review. It is expected that the Storting will start discussing its ratification next autumn.

Content of the Free Trade Agreement
The Agreement contains the following chapters:
• Preamble
• Trade in Goods
• Rules of Origin
• Trade Facilitation
• Trade Remedies
• Sanitary and Phytosanitary Measures
• Technical Barriers to Trade
• Trade in Services
• Investment/Establishment
• Protection of Intellectual Property
• Government Procurement
• Trade and Sustainable Development
• Competition
• Institutional Provisions
• Dispute Settlement

Trade in Goods
Industrial Goods including Fish and other marine products
With the entry into force of the Agreement, the EFTA States abolish all customs duties on imports of industrial products, including fish and other marine products, originating in MERCOSUR. MERCOSUR will gradually eliminate or reduce customs duties on most industrial products, including fish and other marine products, originating in EFTA countries.

The Agreement will, over a period of up to 15 years, remove or reduce duties on most goods currently exported to MERCOSUR by EFTA companies. For example, MERCOSUR countries will eliminate high duties on industrial products, such as:
• Pharmaceuticals (taxed at up to 14%);
• Machinery (taxed at 14 to 20%);
• Chemicals (taxed at up to 18%);
• Fish (taxed at up to 10%);
• Textiles (taxed at up to 35%);
• Car parts (taxed at 14 to 18%).

Agricultural products
The Agreement provides for meaningful tariff concessions on both basic and processed agricultural products.

Among the EFTA states´ agricultural exports which will benefit from the Agreement, through the gradual elimination of duties, through tariff preferences or through tariff rate quotas, are those comprising products such as cheese, coffee, chocolate, lamb meat, spirits, sweets, waters, energy drinks and wines.

In return, EFTA countries offer concessions for agricultural imports of high importance to MERCOSUR. In the case of Norway, these concessions apply mostly to beef, poultry, corn, soya and sugarcane molasses.

Trade in Services
The chapter on trade in services closely follows the approach of the WTO General Agreement on Trade in Services (GATS). It covers trade in all services sectors under all four modes of supply, i.e. cross-border supply, consumption abroad, commercial presence, presence of natural persons. Separate annexes on movement of natural persons supplying services, telecommunication services and financial services complement the chapter with additional disciplines specific to those sectors. The Parties have listed the sectors in which they undertake specific commitments, as well as the exemptions from most-favoured-nation treatment in further annexes. Those lists shall be reviewed periodically with the aim to further liberalise trade in services between both sides.

The MERCOSUR states have undertaken market access commitments in several sectors such as energy related services, maritime transport, telecommunications and financial services.

With regard to maritime transport, MERCOSUR’s offers were commensurable with the concessions made to the EU and comprehend a loosening of market restrictions after 10 years – navigation and cabotage in maritime transport are reserved for national vessels in MERCOSUR – and exemption from light dues after 2 years.

The aim of the chapter on investment is to improve the legal framework conditions for investors from both EFTA and MERCOSUR states. This is achieved by granting non-discriminatory rights of establishment (“commercial presence”) in economic sectors not covered by the chapter on trade in services. The Parties have listed sectors where they are willing to undertake these obligations. In certain economic areas, the Parties have included reservations to national treatment based on restrictions in their national legislations. The chapter also reaffirms the Parties’ right to regulate investments in order to achieve legitimate public policy objectives. The chapter foresees that investors can submit inquiries to a focal point.

The chapter also includes a provision which refers to the corporate social responsibility of enterprises.

Trade and Sustainable Development
The Agreement’s section on trade and sustainable development is based on the EFTA standard used in previous agreements but also includes additional elements that had never been included in EFTA’s FTAs.

The Parties recognise that economic development, social development and environmental protection are interdependent. They reiterate their commitment to multilateral agreements and principles regarding environmental and labour standards and accordingly reaffirm their obligation to effectively implement their respective international obligations. They also commit to uphold levels of protection while recognising the right of each Party to establish its own level of environmental and labour protection.

The chapter contains commitments to promote the Decent Work Agenda and, in this respect, to develop and enhance measures for decent working conditions, occupational safety and health, labour inspection and non-discrimination.

The chapter also contains commitments regarding the sustainable management of forests, including the fight against illegal logging, the promotion of certification schemes and the adoption of measures for forest restoration.

In the article on trade and climate change, the Parties commit to effectively implement the UNFCC and the Paris Agreement and recognise the importance of trade to contribute to the fight against climate change.

For the first time, EFTA has included a clause on trade and sustainable agriculture and food systems, in which the Parties agree to promote sustainable agriculture, as well as to conduct a dialogue devoted to the issue.

Additionally, the chapter also encloses articles concerning trade and biological diversity, as well as trade and sustainable management of fisheries and aqu
aculture. It also identifies potential areas for cooperation between the Parties on trade and sustainable development.