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President Lee Jae-myung and First Lady Kim Hea-kyung take a photo with Brazilian President Luiz Inacio Lula da Silva and First Lady Rosangela da Silva at a cultural performance and welcoming reception hosted by the Brazilian presidential couple at the Ministry of Foreign Affairs palace in Brasilia on July 27 (local time). From left: First Lady Kim, President Lee, President Lula, and First Lady Rosangela da Silva. / Yonhap News

Trade deal negotiations between South Korea and Mercosur (Southern Common Market), stalled for five years, are set to relaunch following President Lee Jae-myung's state visit to Brazil. Political momentum has been injected into the deadlocked trade talks as the leaders of both nations directly agreed to establish a working group.

President Lee and Brazilian President Luiz Inacio Lula da Silva agreed to set up a working group to lead trade and economic cooperation discussions, including the resumption of South Korea-Mercosur trade negotiations in December this year. Kim Yong-beom, Chief of Staff to the President for Policy, and Vice President of Brazil Geraldo Alckmin will each lead the working group to swiftly coordinate key issues and conduct follow-up discussions for resuming negotiations.

In particular, anticipating the potential opening of the domestic agricultural and livestock market under the South Korea-Mercosur trade deal, the South Korean government plans to dispatch an inspection team to Brazil next year to conduct quarantine and hygiene inspections of local slaughterhouses and related facilities.

With negotiations accelerating following the summit, expectations are growing among South Korean companies targeting South America's largest common market, which boasts a population of roughly 300 million and a gross domestic product (GDP) of around $2.9 trillion.

President Lee, currently on a state visit to Brazil, held a summit with President Lula at the Alvorada Palace in Brasilia on July 27 (local time) and stated during a joint press statement, "We deeply agreed that in an era of growing uncertainty in the trade environment, a trade agreement between South Korea and Mercosur is an important task that can no longer be delayed."

President Lula also introduced the establishment of the working group led by South Korea's Chief of Staff for Policy and Brazil's Vice President, saying, "We will identify and coordinate sensitive issues between the two nations so that there are no obstacles to resuming trade agreement negotiations between South Korea and Mercosur."

Senior Blue House Press Secretary Kang Yu-jung explained, "We agreed to establish a bilateral South Korea-Brazil working group to analyze trade opportunities and sensitivities in order to announce the resumption of negotiations on the occasion of the 69th Mercosur Summit in December this year."

Mercosur is South America's largest common market, comprising countries such as Brazil, Argentina, Uruguay, and Paraguay. South Korea and Mercosur initiated trade deal negotiations in 2018, but discussions came to a halt after the 7th round of talks in July 2021 due to differences over the opening of agricultural and livestock markets and quarantine issues.

If an agreement is reached, tariff burdens on South Korea's key exports—such as automobiles, machinery, steel, and electronics—are expected to decrease, boosting their price competitiveness. On the other hand, if imports of highly price-competitive Mercosur agricultural and livestock products, such as chicken, corn, and soybeans, expand, damage to domestic farmers and livestock producers will be inevitable, making the scope and speed of market opening the biggest bone of contention in future negotiations.

This agreement carries significance as it brought trade issues that could not be resolved at the working level for a long time back to the negotiating table through summit diplomacy. With the top leaders of both nations directly designating officials in charge of follow-up talks, assessments suggest that the speed of future discussions and the likelihood of reaching a deal have both increased.

Meanwhile, following the summit, President Lee attended a state luncheon, a cultural performance, and a reception before departing for São Paulo.

                                                                                                             Hong Sun-mi