Resumen
In the face of growing geopolitical rivalry and protectionism from the United States, the European Union (EU) is redesigning its global trade architecture to strengthen its economic security and the resilience of its supply chains by intensifying the expansion and modernization of its network of free trade agreements (FTAs).
Latin America and the Caribbean (LAC) stands out as a reliable and like-minded partner. It is also economically complementary as the region offers precisely what the EU needs most: critical raw materials, such as lithium and copper, and abundant renewable energy sources essential for the green and digital transition. The EU in turn has the capital, technology, and know-how to promote the development of high value added bi-regional production chains.
Once the EU-Mercosur agreement is ratified, the EU’s network of trade agreements with LAC will cover 97% of regional gross domestic product (GDP), well above the coverage of the United States (44%) and China (14%). However, this network is not yet fully interconnected. The fragmentation of the current regimes of origin prevents the combination of inputs from different countries—even if they have bilateral agreements with the EU and with each other—to benefit from tariff preferences, limiting the creation of bi-regional value chains.
To overcome the current fragmentation and interconnect the EU-LAC FTA network, a flexible diagonal cumulation mechanism is proposed as a pragmatic, legally viable, and high-impact solution, taking advantage of existing bilateral agreements. It would allow inputs from countries that have bilateral agreements with the EU and with each other to be considered as originating, without the need to modify the specific rules of origin of each treaty.
The adoption of a common protocol would be the regulatory basis for implementing this system of flexible diagonal cumulation and would be incorporated as an annex to existing agreements between the EU and LAC countries or blocs of countries, without the need to renegotiate them.
This proposal would be the stepping stone for the creation of an integrated EU-LAC bi-regional economic area. This area would encompass 1.1 billion people and have a GDP comparable to that of the United States. It would facilitate the articulation of bi-regional industrial chains, with great potential in high value-added decarbonized chains.
Last but not least, this strategy also contributes to strengthening the EU’s global role as the anchor of a rules-based trading system and offers a replicable and expandable model for integration with other partners with whom the EU has bilateral agreements and who wish to connect to this network of agreements.