EU-Mercosur Trade Deal Explained: UPSC Current Affairs

Description

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Picture Courtesy: DOWNTOEARTH

Context

The European Union (EU) and the Mercosur bloc of South American nations signed the Free Trade Agreement (FTA) to create one of the world's largest free trade areas.

Key Details of the 2026 Agreement

Tariff Elimination: The pact will eliminate more than 90% of tariffs on goods traded between the two regions.

Geopolitical Significance: EU leaders framed the deal as a strategic move to promote multilateralism and fair trade in response to rising global protectionism.

Next Steps: Agreement requires formal consent from the European Parliament and ratification by the national legislatures of the Mercosur member countries before it can fully enter into force.

What is European Union (EU)?

The European Union (EU) is a political and economic union comprising 27 member states located primarily in Europe.

It functions through a standardized legal system and a single internal market that ensures the free movement of people, goods, services, and capital.

Member States

Member Countries: Austria, Belgium, Bulgaria, Croatia, Cyprus, Czechia, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, and Sweden.

The Eurozone: 21 members use the Euro (€) as their official currency, with Bulgaria being the most recent to join the euro area.

Schengen Area: A border-free zone encompassing most EU members (excluding Ireland and Cyprus for now) and four non-EU countries (Iceland, Liechtenstein, Norway, and Switzerland), allowing travel without passport checks.

Governance & Institutions

European Commission: The executive branch that proposes legislation and manages daily operations, led by President Ursula von der Leyen.
European Council: Defines the EU's overall political direction and priorities, led by President António Costa.
European Parliament: The directly elected legislative body representing EU citizens.
Council of the European Union: Represents the governments of the member states and shares legislative power with the Parliament.
Court of Justice of the EU (CJEU): Ensures EU law is interpreted and applied consistently across all member states.

What is Mercosur?

Mercosur is a South American trade bloc established in 1991 to promote free trade and the fluid movement of goods, people, and currency.

Membership and Structure

Full Members: Argentina, Brazil, Paraguay, Uruguay, and Bolivia.
Suspended Members: Venezuela has been a full member since 2012 but remains suspended indefinitely due to concerns regarding democratic order.
Associate States: Includes Chile, Colombia, Ecuador, Guyana, Peru, Suriname, and Panama.
Headquarters: Located in Montevideo, Uruguay.
Governance: The primary decision-making body is the Common Market Council (CMC), and the presidency rotates between member states every six months.

Source: DOWNTOEARTH

Attempt Daily Quiz

PRACTICE QUESTION

Q. The Mercosur bloc, which recently signed a free trade agreement (FTA) with the European Union, comprises which of the following countries?

(a) Brazil, Argentina, Chile, and Uruguay

(b) Brazil, Argentina, Paraguay, and Uruguay

(d) Argentina, Peru, Colombia, and Brazil

Answer: b

Explanation: Mercosur is composed of six sovereign member states: Argentina, Bolivia, Brazil, Paraguay, Uruguay and Venezuela (suspended since 2016).

Frequently Asked Questions (FAQs)

MERCOSUR (Southern Common Market) is a South American trade bloc formed in 1991 by Argentina, Brazil, Paraguay, and Uruguay to create a common market with free trade, capital, goods, and people movement, evolving into a customs union with a common external tariff.

The European Union (EU) is a political and economic union comprising 27 member states located primarily in Europe. Established to ensure peace and prosperity following World War II, it operates as a "single market," allowing for the free movement of people, goods, services, and capital.

Brexit is the term for the United Kingdom's withdrawal from the European Union (EU), resulting from a 2016 referendum where 52% of UK voters chose to leave, leading to the UK's formal departure on January 31, 2020, ending its membership in the political and economic bloc it joined in 1973.