The European Union and South American trade bloc Mercosur took another step on Friday towards sealing one of the world’s most ambitious free trade agreements in decades.
European Commission president Ursula von der Leyen announced the conclusion of negotiations between the two blocs at a summit in Uruguay’s capital Montevideo alongside the Mercosur leaders of Uruguay, Paraguay, Argentina and Brazil.
It follows a quarter of a century of negotiations and comes five years after the inking of a supposed final deal that remained unratified after fierce criticism from European farmers and environmentalists.
Von der Leyen described the latest agreement as a chance to create the “largest trade and investment partnership the world has ever seen” which would dramatically lower tariffs between the two blocs which between them contain 700 million people.
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But her statement implicitly acknowledged the ongoing opposition to the deal back home that could yet prevent its ratification by member states.
“The finish line of the EU-Mercosur agreement is in sight. Let’s work, let’s cross it,” she wrote on social media.
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The five years since the signing of the initial deal have seen often rancorous talks aimed at strengthening its environmental safeguards around beef and other agricultural exports from Mercosur. Brazil, the South American bloc’s most important member, has faced intense criticism because of its failure to enforce its own laws protecting the Amazon rainforest from encroachment by cattle ranchers and soy farmers. These environmental issues, allied to accusations that Mercosur farmers have a major competitive advantage because they are subject to lower regulatory standards than their competitors in the EU, have been seized on by many European farming lobbies as justification for opposing the deal.
Mercosur states dismiss the concerns as cover for naked protectionism by Europe’s far less efficient farming sector. They point out the proposed deal does little to further open up EU markets to Mercosur’s beef sector which will remain focused on exports to Asia.
With the conclusion of yet another final agreement attention will now turn back to Europe and whether the latest terms are enough to overcome internal EU resistance. Immediately after yesterday’s announcement France reaffirmed its opposition. The outgoing Irish government has also stated it is against the deal as have a number of other member states, among them Poland and Italy. As well as the commission, the agreement is strongly backed by Germany, which views it as an important concession by Mercosur’s traditionally closed markets to its export-orientated economy, and Spain, which has deep economic ties with the region.
In Montevideo von der Leyen implicitly sought to frame support for the deal as a response to the darkening international outlook.
“In an increasingly confrontational world we demonstrate that democracies can rely on each other. This agreement is not just an economic opportunity it is a political necessity,” she said at a press conference. Both EU and Mercosur members are facing the prospects of steep tariffs on their exports from the incoming Trump administration. In recent years both blocs have posted growth rates that lag behind those in the US and Asia.
EU and Mercosur negotiators argue the proposed agreement is a chance for the two languishing blocs to make up ground globally by firing up a new motor for growth. For Mercosur the agreement would represent a major shot in the arm after years during which the bloc looked increasingly moribund and facing threats from Uruguay and Paraguay to split away and search for unilateral free trade deals Argentina and Brazil seemed unwilling or unable to conclude.
(c) Copyright Thomson Reuters 2024
