In June, an understanding that has a worldwide political and economic impact was reached in Brussels. The Mercosur-EU Trade Agreement will create a joint market of 800 million people and remove duties on over 90 percent of bilateral trade, delivering a clear message of integration and free trade when the world most needs it.

The comprehensive agreement goes beyond tariff issues. It includes provisions on quality standards,intellectual property rights and environmental protection.

The Common Market of the South (Mercosur) was founded in 1991, after the signing of the Asunción Treaty by Brazil, Argentina,Uruguay and Paraguay. But the bloc has not been able to implement the agenda imagined by its founders,and it has been stuck in what is known as an imperfect custom union, as the common external tariff is applied with exemptions and there is no free movement of factors of production.

The new administrations of Argentina and Brazil have energized the international agenda of the Mecosur; and Brexit, changes in United States' trade strategy and the active commercial agenda of European Union in recent years have also tipped the scale toward signing the Agreement.

If ratified, the European Union will gain access to a market for goods and services which Mercosur has traditionally protected. Just to give an example, duties on cars,footwear or clothes now reach 35 percent. On the service side, they will have better opportunities to provide telecommunications, logistics and other services. Furthermore, they will benefit from the huge Mercosur public procurement market, as there are provisions on transparency and fair treatment in the bidding process.

European agribusiness sectors will benefit as well. Companies will have access to markets that are key for Mercosur, such as chocolate,wine, dairy and among others.Most importantly, the bloc agreed to protect European geographical indications.

The EU also secured the support of Brazil on its environmental agenda, as one condition for the signing of the agreement was that the country had to stay in the Paris Agreement on climate change.

In a world where the headlines of major newspapers mostly talk about the frictions between China and the United States, the economic growth of Asian countries and the great potential of Africa, this agreement helps to draw attention toward Mercosur and promotes the flow of capital and know-how needed to transform the region into a sophisticated and global production base for world markets.

Last but not least, consumers on both sides of the Atlantic will have more options for products and services.

But there are sectors which cast doubts on the net benefits of the agreement.

European agricultural producers are very loud regarding their worries about quality standards and food production models in Mercosur. These worries are unfounded,because the agreement stipulates that European quality standards will not be lowered; needless to say,Mercosur producers are capable of meeting the higher standards. The agreement also allows sensible quotas for products, so the economic impact for those less competitive sectors will be limited. The challenge for European producers will be to discuss with scientific data the role and impact of some technologies used in Mercosur, such as GMOs or New Breeding Techniques, and adjust the regulations if needed.

In South America, critics are focused on the trade in industrial goods and on the loss of autonomy in commercial policy. Regarding industrial goods, the agreement stipulates that it will require up to 15 years to adjust the tariff structure and allows the implementation of some temporary measures to protect the less competitive sectors.

Regarding the loss of autonomy in commercial policy, we should first evaluate whether or not measures such as export duties or non-automatic import licenses are good for trade and development. Free trade advocates are actually celebrating that with this agreement government will not be able to implement this kind of trade-distorting practices anymore.

The agreement reached in Brussels is only the first step in a long journey. First it has to be ratified by parliaments, and then, especially in the Mercosur, all the complex reforms needed to make the transition toward an open economy as less traumatic as possible need to be conducted.

What if the Agreement is not ratified by all the Mercosur countries? In Argentina, presidential elections will take place in October. Interestingly, a political party that has some chances of winning publicly announced that it will not support the deal. In that case, the Mercosur countries will probably discuss whether they should go on together or not; those countries willing to integrate their economies with global markets will sign a similar agreement with Europe on their own. Those countries that do not sign the Agreement will continue as they have been up to the present day.

But in case the agreement is ratified and implemented, it could act as a catalyst for structural reforms needed in the region. Mercosur will deepen its cooperation and integration, and it will move forward with the reduction of the common external tariff and all the new trade agreements under negotiation:with European Free Trade Association, Canada, South Korea, Singapore and, as it was announced recently, with the United States.

And China? In the 21st century, it is impossible to talk about global markets without considering China. When then Chinese premier Wen Jiaobao visited the region in 2012, he proposed that a feasibility study be conducted on a free trade agreement between China and Mercosur. Despite the initial enthusiasm, the proposal did not prosper,but it was never declined officially.Should Mercosur strengthen this tendency toward greater openness,there will be a window of opportunity to wake the proposal from its hibernation.

The next great turning point for Mercosur could be an agreement with China.

The author is the director of the Chinese Investment Monitor of the Argentina-China Chamber of Commerce and a member of the Argentine Council for International Relations.

The author contributed this article to China Watch exclusively. The views expressed do not necessarily reflect those of China Watch.

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