What Does the Free Trade Agreement That Milei Wants to Sign With Trump Imply?

On Monday afternoon, U.S. President Donald Trump referred to the great possibility of signing a free trade agreement with Argentina. Thanks to the leadership of Argentine President Javier Milei, trade relations with the United States could be greatly benefited.

Faced with the high probability that this agreement will become a reality, it would be necessary to exit the current MERCOSUR structure, whose level of economic integration is greater than the FTA.

However, the benefits that the agreement with the United States could provide are incredibly superior to the current trade scheme with MERCOSUR.

What is a free trade agreement?

In the chain of economic integration processes, the free trade agreement (or free trade agreement) represents the second link in the network.

Within what a free trade agreement represents, the main idea is the establishment of a bilateral process in which both countries gradually eliminate their tariff and non-tariff barriers.

Despite the elimination of tariff measures between the two signatory countries, the tariff barriers of both signatories toward third countries would remain. The perfection of an FTA doesn't contemplate the implementation of a common external tariff (CET) regarding third countries nor the harmonization of tariff policy.

Additionally, unlike the current MERCOSUR scheme, where there is the implementation of a CET for the bloc, but not the harmonization of the tariff universe, the free flow of capital, raw materials, and labor force between the signatory countries is not taken into account.

What are the advantages of signing an FTA?

First of all, it should be noted that the signing of a free trade agreement is a great opportunity for both countries to encourage and boost foreign direct investment (FDI), as well as efforts in imports and exports.

Another great advantage that the signing of an FTA would bring is the promotion of fair trade practices, avoiding actions such as dumping and subsidies to certain industries.

Within the Argentine economy, one of the most benefited sectors would be agriculture, followed by the energy and industrial sectors, which would see a strong increase in their sales.

In terms of international trade, an advantage that can be highlighted if this agreement proceeds is the reduction of logistics costs, which have been increasing due to some global incidents caused by events in key places like the Suez Canal or the Gulf of Aden.

The different regional economies of the country could also benefit from a colossal expansion in sales destinations, as access to a market as diverse and important as the U.S. could serve to showcase different products.

Among the products most benefited by this agreement are: Soy in all its variants, dairy products, the wine sector, the agricultural sector, and the livestock sector, as meat represents a high-quality product and complement in the U.S. market.

In the last year, Argentine meat exports broke records and reached the unbelievable amount of 933,261 tons, with the United States being one of the largest destination markets, representing 45% of the total market share, according to official data.