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In December 2023, the twenty-year negotiation efforts around the EU-Mercosur agreement were thought to finally culminate with the approval of a definitive text that could be agreed upon by all parties. The deal between the two regional blocs should serve to foster and reinforce mutual trade, political and cultural ties, by liberalising trade exchanges, integrate value chains and shape trade relations through high standards and shared values of democracy and rule of law. However, negotiations have been underway for more than twenty years and the situation in the near future is not likely to change.
In the past year, there was a conjuncture of ideally positive conditions to finally close the deal, but this was not yet the case. Under European pressures, the latest negotiating efforts were mostly focused on the integration of environmental, sustainable development and human rights-related provisions in the agreeement text. To this end, there were hopes that the comeback of environmentally-sensitive President Lula in Brazil and Brazil’s rotating Mercosur presidency would have helped get environmental protection in trade regulations back in the spotlight, as opposed to what former President Jair Bolsonaro did. On the other side, Spain’s rotating presidency at the Council of the European Union in the same year had embraced the need to ensure EU’s open strategic autonomy, by emphasising the strategic role of Latin America. None of these two lived up to the expectations they had raised.
In January, EU farmers started taking over highways in France, Italy, Spain, Germany, and Belgium to voice their concerns about the state of play of agriculture in Europe. Among their preoccupations, are the unbalanced environmental regulations and the increasing competition of non-EU products in the European market. Considering the approaching elections in the EU, Member States’ governments have tried to mitigate farmers’ protests by siding their requests with the concession of incentives and the approval of a revision of the Common Agriculture Policy (CAP). Aside from EU Member States’ official postures, the fierce protests of European farmers have cast light on some key elements that have long embodied the main divide. In this conjuncture, the EU-Mercosur agreement is suffering a major setback. What does its future look like and why is it so important? Let’s explore.
The EU-Mercosur agreement
The beginning of the EU-Mercosur negotiations dates back to 1999, when the EU was the first trade partner of Mercosur, a common market organization, whose founding members are Argentina, Brazil, Paraguay, and Uruguay. Bolivia has also recently become a full member of Mercosur, while Venezuela’s membership was suspended in 2017. In the last 25 years, the situation has changed considerably, with China overtaking the EU as the first trade partner of Mercosur countries and absorbing 29% of the total exports of the area. Despite the declining trade exchanges between Mercosur and the EU, negotiators have maintained their efforts to close a deal that not only concerns trade, but also political dialogue and cooperation. The deal indeed intends to strengthen trade, political, and cultural ties between the EU and Mercosur.
As far as the trade pillar is concerned, the deal would entail the elimination of tariffs on 91% of EU goods exported to Mercosur (i.e., cars, pharmaceuticals, clothing). Likewise, it would eliminate import duties on 92% of Mercosur goods imported into the EU. In the case of agricultural goods, the deal envisions different scales of liberalization to protect the products that would suffer stronger external competition in Europe.
Trade stands out as the most controversial and conflicting pillar, which has contributed to delaying the definition of a final text. Towards the end of 2019, negotiators agreed in principle on a final version of the deal, which should have undergone ratification by both the EU Member States’ national parliaments and the European Parliament. After achieving this final version, farmers’ interest groups started lobbying against the ratification process, while environmentalist civil society associations and parties claimed that the agreement would have contributed to harming Mercosur countries’ environment and deepening inequalities. From that moment on, the negotiation table has focused on amending the trade pillar to include specific environmental, sustainable development, and human rights-related provisions.
The integration of environmental provisions proved to be the most controversial and debated. Indeed, Mercosur countries have seen them as a strategy of the EU to further prolong negotiations or even interrupt them, by insisting on what the former perceive as subtle protectionist measures. Despite the ideally favorable conditions to get the deal closed in December, a combination of complications took a toll on it. Among these, the change of presidency in Argentina and its proximity to the decisions around the agreement’s revised text impeded outgoing President Fernández from making a final decision on it. President Milei, who had already expressed his skepticism around Mercosur during his electoral campaign, has manifested a willingness to negotiate a new agreement with the EU. Complicating things further are other Mercosur members, such as Bolivia and Uruguay, which have strong diplomatic and trade ties with China, their first trade partner. Uruguay has made explicit its willingness to close a deal between Mercosur and China, as opposed to the one with the EU. Chinese competition in the region is one of the main challenges for the EU to scale up its presence and also a driver to successfully close the deal with Mercosur.
On the other side, EU Member States are divided on this matter. Some of them see the peril of EU farm production being undermined by cheaper foreign products that do not comply with EU environmental standards. Thus, they ask for “mirror clauses” to impose the same social, sanitary, and environmental regulations in force in the EU on imported goods. This is especially the case of France and President Macron’s overall skepticism of the deal. On the other hand, Germany stands out as the main promoter of the EU-Mercosur agreement, attracted by the new trade opportunities deriving from the liberalization of European car and car parts exports. Earlier this year, the fierce protests of European farmers have once again thrown light on the elements of friction that in part explain the long negotiation process and the lack of consensus among large sectors of the European population.
EU farmers’ protests: what is at stake with the EU-Mercosur agreement?
On the wave of farmers’ protests in Europe, on 31 January 2024, Copa-Cogeca, the largest farmers and farming cooperatives lobby in the EU, sent a letter to the President of the European Commission, Ursula von der Leyen. Among the various requests it reported, there was the need to “ensure reciprocity in farm production standards and a level playing field to ensure fair trade”. This directly pointed to diverse ongoing international trade negotiations, of which the EU-Mercosur agreement is just the most emblematic example. The letter explicitly reads “ A continuous push for getting the deal across the line will be perceived as a further provocation by the farming community and will increase the rejection for decisions taken by the European Commission”.
Overall, at the heart of farmers’ discontent are the increasing and exacerbated environmental regulations approved within the EU, the limited profit margin, the increasing bureaucracy, and unfair competition from non-EU products. In light of this, farmers see any international trade agreements that do not impose the same standards in force in the EU as a threat to the profitability and security of EU farm production.
The European Commission and Member States have responded by delaying the implementation of the Green Deal agenda and the revision of specific environmental standards, among others. Yet, such responses will have a near-term impact only. Farmers’ discontent has a much bigger scope and, for the moment, it seems to be finding the highest support among right-wing and far-right parties. In a scenario where these latter predominate in the European Parliament’s new majority, a more protectionist posture could be adopted regarding international trade. Whereas, if liberal or progressive parties were to predominate, then they would likely support international trade negotiations with a more open approach.
Is failure even an option at the negotiating table?
Whichever will be the electoral result in the EU, the agreement goes well beyond agriculture and concerns the global positioning of both regional blocs in an extremely volatile context from both the geopolitical and geoeconomic perspectives. The consequences of the war in Ukraine have taught the EU an essential lesson on the need to diversify its supply chains as a way to increase resilience vis-à-vis external negative dynamics. In this sense, the EU-Mercosur deal would be perfectly consistent with such a goal, by intensifying new or existing trade routes and contributing to reaching the goal of strategic autonomy. Yet, this narrative clashes with the unpopularity of the deal among several EU Member States, which puts national leaders in a difficult position when it comes to its endorsement.
On the other side of the Atlantic, Mercosur has been facing increasing criticism from its member states. During his electoral campaign, Javier Milei asserted Argentina would have withdrawn from the membership, only to revise his radical postures after his election. Other member states, such as Uruguay, have long insisted on the need to make Mercosur more flexible by allowing member states to also negotiate bilateral trade agreements, not only as a bloc. The regional integration process within Mercosur has slowed down in the last few years, also because of the lack of political efforts in this direction. Therefore, there are many challenges on both sides which could potentially lead to the failure of the negotiations or to finding new ways to reach an agreement. EU Trade Commissioner Vladis Dombrovskis affirmed that the commitment to close the deal remains firm, although developments at the negotiating table are not expected in the near term.
- What are the main political discourses around food production at the EU level? How politically represented are they?
- How could the regional political rivalry between Brazil and Argentina affect the EU-Mercosur agreement?
- Does the EU-Mercosur agreement present win-win opportunities for both regional blocs or does it reiterate asymmetrical trade power relations?
Suggested readings
“Unión Europea y Mercosur: cuatro nudos ¿y un desenlace?”, Nueva Sociedad, no. 311, May-Jun 2024.
