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Frequently Asked Questions – Mercosur

What is Mercosur?
  • The free trade area of Mercosur, founded in 1991, includes Argentina, Brazil, Paraguay and Uruguay.Footnote 1 Mercosur functions as a customs union and trade bloc and has the expressed ambition of becoming a common market.
  • Mercosur as a bloc is the eighth largest economy.
  • The four Mercosur members have a combined gross domestic product of over $3 trillion and a population of 261 million.
  • Trade with Mercosur nations, with whom Canada has no preferential trade agreements, stands at a value of $9.9 billion in 2019.
  • Mercosur members have agreed to the free movement of goods and services between member countries and are gradually eliminating almost all non-tariff restrictions and other limitations to trade between members. With certain exceptions, usually for reasons of national interest, nearly all intra-Mercosur tariff lines have been reduced to zero.
  • Mercosur members subscribe to a common external tariff structure, which dictates the tariff that members apply to trade with non-member or associate countries.
Why is Mercosur important to Canada?
  • Canada is a trading nation. Canadians’ standard of living depends on robust international trade as a key driver of economic growth for a prosperous middle class.
  • Expanding and diversifying Canada’s trade with large fast-growing markets, such as Mercosur, is a priority for the Government of Canada and contributes to its inclusive trade agenda and trade diversification strategy.
  • With its population of 261 million and combined GDP of over $3 trillion, Mercosur offers Canada strong potential to establish an ambitious, comprehensive, and inclusive trade relationship.
Why did Canada agree to launching free trade negotiations with Mercosur?
  • Expanding and diversifying Canada’s trade with large, fast-growing markets, such as Mercosur, is a priority for the Government of Canada.
  • There is strong potential to establish an ambitious, inclusive and comprehensive trade relationship between Canada and Mercosur.
  • Canada is a trading nation. Canadians’ standard of living depends on robust international trade as a key driver of economic growth for a prosperous middle class.
  • Through Canada’s inclusive approach to trade, a Canada-Mercosur free trade agreement represents an opportunity to help ensure that the benefits of trade are more broadly shared, included with respect to underrepresented groups such as Woman Indigenous and SMEs.
How does strengthening trade relations with Mercosur align with Canada’s inclusive trade agenda?
  • The Government of Canada is committed to advancing an inclusive trade agenda, in recognition that trade policies need to respond and contribute meaningfully to overall economic, social and environmental policy priorities. In addition to an environmental assessment, Canada is for the first time committing to expanding, in the context of Mercosur negotiations, the impact assessment process to include labour and gender.
  • We are committed to developing and advancing an inclusive trade agenda to ensure that all segments of society can take advantage of the opportunities that flow from trade and investment.
  • Canada’s inclusive trade agenda and leadership in transparency brings to the forefront the importance of women-owned enterprises, Indigenous peoples, Micro, Small and Medium Enterprises (MSME), labour and environmental issues to the table.
Won’t a free trade agreement with Mercosur hurt the agricultural or other sectors?
  • As in any negotiation, Canada will seek an ambitious and balanced market access outcome and will strongly defend Canada’s interests in agriculture and in other sectors.
What will be the scope of coverage for the FTA negotiations?
  • Canada and Mercosur agreed to launch negotiations to develop a more ambitious trade relationship by negotiating an agreement that will be commercially meaningful, mutually beneficial and balanced.
  • Areas of coverage would include 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, government procurement, inclusive trade (including environment; labour; micro, small and medium-sized enterprises; trade and gender; trade and Indigenous peoples and electronic commerce) and horizontal, legal and institutional provisions (including dispute settlement).
How will a trade agreement with Mercosur benefit Canadians?
  • Canada is a trading nation. Canadians’ standard of living depends on robust international trade as a key driver of economic growth for a prosperous middle class.
  • A comprehensive and ambitious outcome in an FTA with Mercosur would provide improved market access for world-class Canadian goods and create more opportunities for first-time exporters to tap a rapidly growing market.
  • A comprehensive FTA with Mercosur also has the potential to reduce tariffs on Mercosur’s exports to Canada—benefiting Canadian customers looking for more choices at more affordable prices.
What are the potential sectoral gains for Canada of a free trade agreement with Mercosur?
  • An FTA could enhance market access for Canadian exporters in a number of industrial sectors, including:
    • automobiles and parts (current tariffs of up to 35%)
    • chemicals and plastics (current tariffs of up to 18%)
    • pharmaceuticals (current tariffs of up to 14%)
    • aluminum (current tariffs of up to 16%)
    • machinery and equipment (current tariffs of up to 20%)
    • information and communications technology (current tariffs of up to 20%)
    • forest products (current tariffs of up to 16%)
    • scientific instruments (current tariffs of up to 18%)
  • Canada’s exports of fish and seafood to Mercosur, averaging $2 million a year between 2014 and 2016, could also increase from the tariff being reduced: Brazil and Argentina are significant global importers of salmon in particular (Mercosur’s current tariff on salmon ranges from 10% to 16%).
  • A comprehensive agreement with Mercosur would also be expected to lead to increased and predictable access for Canadian service providers in sectors such as energy, extractive industries, infrastructure, environment, telecommunications, distribution and logistics, transportation, tourism and travel-related services.
Has the Government of Canada consulted Canadians on the possibility of a free trade agreement with Mercosur?
  • Yes. A broad range of stakeholders, including representatives from companies, industry and business organizations and non-governmental organizations, shared their views on beginning FTA negotiations with Mercosur.
  • Consultations, announced in a Canada Gazette notice, were launched on April 29, 2017, and ended on May 29, 2017, to allow stakeholders to provide views on a possible Canada-Mercosur FTA and to give officials a better understanding of current Canadian interests.
  • While the consultation period announced in the Canada Gazette is over, officials from Global Affairs Canada continue to reach out to Canadians and welcome their views and submissions on this initiative.
  • Messages received to date indicate general support for the initiative, noting opportunities for Canadian businesses to expand their markets in this thriving region, as well as opportunities to address existing non-tariff trade barriers, while emphasizing that the government’s focus and resources should remain committed to other ongoing trade files, such as NAFTA, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership and trade with China.
Were the views of Indigenous groups in Canada sought?
  • Yes, Indigenous groups have been, and continue to be, consulted. They have expressed interest in the negotiations, particularly from an inclusive trade policy perspective.
  • In June 2017, officials met with representatives from the Assembly of First Nations, Metis National Council and Inuit Tapiriit Kanatami to seek the views of Indigenous peoples of Canada on a possible Canada-Mercosur FTA.
  • Canadian officials also keep Indigenous partners apprised on the negotiations through the Global Affairs Canada-led trade-focused Indigenous Working Group.
Were the provinces and territories consulted?
  • Yes, and consultations will continue.
What are the next steps?
  • The government will continue to engage Canadians while pursuing a deal that is comprehensive, ambitious and inclusive and will benefit the middle class and those working hard to join it.
Will the negotiating texts be made public?
  • Canada has agreed with the other parties, as is the standard international practice when negotiating international agreements, that only the final text will be shared once it is agreed upon by all negotiating parties.
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