After the conclusion of negotiations between the EU and Mercosur at the end of 2024 our sense was that the next milestone in the agreements between the leading regional blocs in the world economy would likely to be attained by EFTA and Mercosur[1]. Half a year later this has in fact come to pass with the EFTA and Mercosur representatives declaring on July 2, 2025 that the talks on the creation of a free trade area between Mercosur and EFTA were finalized[2]. The completion of the FTA negotiations between the two regional blocs after 14 rounds of negotiations is a further contribution to the widening array of the “integration of integrations” accords (those concluded between regional integration arrangements) – a trend that we expect to continue to develop in the coming years. The build-up in such accords coming from Europe points to the likelihood of a crystallization of a platform for regional integration arrangements in the global economy – something that in our view could become an integral part of a reconstructed global economic architecture.
According to the Joint Statement by the Signatory State Parties of MERCOSUR (Argentina, Brazil, Paraguay and Uruguay) and the EFTA States (Iceland, Liechtenstein, Norway and Switzerland) on the conclusion of the negotiations of a Free Trade Agreement, “the MERCOSUR – EFTA Free Trade Agreement will create a free-trade zone of almost 300 million people and a combined GDP of more than US$ 4.3 trillion. Both sides will benefit from improved market access for more than 97% of their exports, which will increase bilateral trade and translate into benefits for businesses and individuals”[3]. The trade agreement is yet to enter into force – according to the official Joint Statement, Mercosur and EFTA commit to ensure that the accord is signed in the coming months of this year.
The Joint Statement also points to the benefits of the free trade accord for the small and medium-sized companies of the signatory economies, with important economic benefits also emanating from the greater predictability and legal certainty for businesses associated with the implementation of the FTA agreement. In terms of coverage, the FTA accord will include “trade in goods, trade in services, investment, intellectual property rights, government procurement, competition, rules of origin,…, sanitary and phytosanitary measures, technical barriers to trade, and legal and horizontal issues including dispute settlement, and a chapter on trade and sustainable development with its corresponding Record of Understanding”[4].
The conclusion of the EFTA-Mercosur and the EU-Mercosur free trade talks has been accompanied by recent statements from the EU about the bloc’s plans to form a trade alliance with the economies of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) [5] – if such a scenario were to materialize, the possibility of the formation of a mega-regional platform that includes CPTPP, Mercosur, EU and EFTA could notably increase[6]. The formation of such platforms could provide palpable impulses to trade liberalization in the world economy, making regionalism/mega-regionalism a key driver in the opening of markets and neutralizing the adverse effects of rampant protectionism. At the same time the economic weight of such platforms could exert significant gravity effects on trade flows, leaving other parts of the world economy at risk of succumbing to the effects of trade diversion. Some of the observers may also see a challenge in the emergence of such mega-regional platforms for the role of global international organizations such as the WTO.
The launching of trade accords among by the leading regional integration blocs is clearly picking up pace and we expect that further such agreements will take less time to conclude, with the recent trade deals serving as important benchmarks. The Mercosur-EFTA agreement may also provide a contribution to the building of trade ties across the North-South axis, though elsewhere in the world economy there is clearly tremendous potential for such accords to be concluded among the regional blocs of the Global South (the South-South axis). The upcoming BRICS summit could provide crucial impetus to South-South trade liberalization via greater cooperation among the respective regional integration blocs from the developing world against the backdrop of unprecedented protectionist headwinds.
[1] https://brics-plus-analytics.org/mercosur-eu-trade-deal-a-breakthrough-in-mega-regionalism/
[2] https://www.efta.int/media-resources/news/efta-and-mercosur-conclude-negotiations-free-trade-agreement
[3] https://www.efta.int/media-resources/news/efta-and-mercosur-conclude-negotiations-free-trade-agreement
[4] https://www.efta.int/media-resources/news/efta-and-mercosur-conclude-negotiations-free-trade-agreement
[5] https://brics-plus-analytics.org/eu-targets-a-link-up-with-cptpp/
[6] The EU and EEA EFTA states formed the European Economic Area (EEA) in 1994 (year of the entry of the agreement into force).
Yaroslav Lissovolik, Founder, BRICS+ Analytics
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