Free Trade Agreement Between Canada And The Mercosur Member States

The first round of negotiations for a comprehensive Canada-Mercosur Free Trade Agreement (FTA) took place in Ottawa on March 20, 2018. The Canadian Minister of International Trade, François-Philippe Champagne, welcomed representatives from the Mercosur member states of Brazil, Argentina, Paraguay and Uruguay. Following a broad range of consultations with stakeholders, including representatives from companies, industry and business organizations and non-governmental organizations, a second round of negotiations took place in Brasilia between June 11-15, 2018. The third round of negotiations is scheduled to be held in Ottawa in September 2018.

As one of the top ten importing countries in the world, Canada purchased more than CAD$500 billion in international goods and services in 2017.2 The FTA has the potential to create significant opportunities for companies from Mercosur member states that provide or want to provide goods and services to Canada. Despite the benefits to all four countries that are part of the Mercosur bloc, this article is going to focus primarily on the anticipated impact on trade between Canada and Brazil.

The main benefit of the FTA to Mercosur members is expected to be a reduction on tariffs on Mercosur's exports to Canada. Companies that are part of Mercosur member states will be able to provide competitive pricing which will benefit Canadian customers looking for affordability. According to the Minister of International Trade, the FTA with Mercosur could reduce the current tariffs of up to 35% on Canadian automotive, 18% on chemicals, plastics and scientific instruments, 14% on pharmaceuticals, 16% on aluminum and forest products, 20% on machinery, equipment and information and communications technology.

According to the Brazilian government the FTA has the potential to create opportunities for at least 90 Brazilian products, including footwear, chemicals, rubber, non-metallic minerals and automobiles. The FTA is also exploring the elimination of export tariffs for Brazilian goods especially in the industrial sector. The FTA's scope is expected to cover trade in goods, rules of origin, origin procedures, trade facilitation and customs cooperation, trade remedies, sanitary and phytosanitary measures, technical barriers to trade, trade in services (including cross-border trade in services, financial services, temporary entry and telecommunications), investment, intellectual property rights, competition policy and public and private market participants and government procurement.

The Government of Canada also announced that the negotiations will emphasize inclusive trade, covering: the environment; sustainable development; labor legislation; micro, small and medium-sized enterprises; trade and gender (including women-owned enterprises, youth and Indigenous people) and electronic commerce.

The Brazilian Minister of Industry, Foreign Trade and Services Marcos Jorge de Lima, considers the beginning of these negotiations to be very strategic and underscores Brazil's determination to open up and participate in international trade. The negotiations on the FTA comes after the United States announced measures that could impact Brazilian exports of steel and aluminum products to that market. "While some international players close, Brazil and Mercosur partners have demonstrated that the integration of our markets into the global value chains is fundamental. The negotiation of new agreements, like this with Canada, is an important path", he said.

In 2017, Canada and Mercosur exchanged $8.9 billion in trade7. From January to April of 2018, Brazil exported to Canada US$932 million, up 7.27% compared to the same period in 2017. Canadian exports to Brazil during that same time equalled US$563 million, 14.98% more than the same period last year8. These numbers are expected to increase with the expansion of market access promised by the FTA.