EU-Mercosur trade deal opens market for auto parts exports

The European auto industry expects the EU-Mercosur trade deal to be ratified quickly as it removes 35% of import tariffs imposed by Brazil and Argentina on EU car exports.

The agreement was well received by the European Automobile Manufacturers Association (ACEA), which notes that the South American trading block, which also includes Uruguay and Paraguay, is home to around 270m people and where 3.3m new cars were sold in 2018.

Last year, the European Union exported only 73,000 cars to Mercosur, representing 2.2% of the total market in the four countries of the bloc. This means there is plenty of room for more export sales. “Under the right conditions, there is real growth potential for the EU auto industry given the size of the Mercosur market both in terms of population and GDP,” says ACEA general secretary Erik Jonnaert.

Trade deal is also a potential benefit for EU  auto parts manufacturers, whose exports currently attract 18% tax on many products they sell to Mercosur countries.

CLEPA (European Association of Automotive Suppliers) notes that trade deal between the EU and Mercosur in auto parts exports will be fully liberalized within 15 years of the conclusion of the agreement. For the first seven years, however, Mercosur tariffs on these products will remain as they are now, but significant tax cuts will follow from the eighth year onwards.

CLEPA notes that the agreement “would consolidate a strategic political and economic partnership and create significant opportunities for sustainable growth on both sides.”

As it stands, EU auto parts exports to Mercosur generate more revenue than finished cars. Data from the European State Agency Eurostat show that EU-manufactured auto parts sales to Brazil were €2.1bn (US$2.3bn) in 2018. This compares to €555m (US$622m) in cars and €20m (US$22m) in trucks.

This is the same story for the other major Mercosur market, Argentina, which imported €606m (US$679m) in EU auto parts last year, compared to €293m (US$328m) in cars manufactured in EU.

The parts are by far Brazil’s largest automotive export to the EU, offsetting exporters with €208m (US$233.1m) in 2018, compared to just €5m (US$5.6m) in cars and €26m (US$29.1m) in trucks.

Argentine exporters sold €197m (US$ 220.8m) in auto parts to the EU in 2018 and only €2.1m (US$2.4m) in cars.

The deal is expected to help Brazilian and Argentine exporters increase these numbers as all taxes levied on EU industrial products will be eliminated in ten years. The EU, for example, now charges 10% on imports of cars made in Brazil and Argentina and 3% to 4.5% on many Brazilian and Argentine auto parts.

Source: Wards Auto

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