EU-Mercosur

Brussels contemplates circumventing EU member states with Mercosur trade deal.

Talks of a Free Trade Agreement (“FTA”) the EU and Mercosur kicked off in 1999! After two decades, which included phases of erratic negotiations, both parties reached an agreement in principle in 2019. Nevertheless, geopolitical challenges have blocked the ratification of the agreement.

Negotiations had been on hold since July 2020, but the potential food security crisis caused by the War in Ukraine prompted civil society organisations in EU member states to push harder for the approval of the FTA deal. In May 2022, Virginijus Sinkevicius, EU Commissioner for Environment, Oceans and Fisheries requested that ministers from Mercosur countries address the missing environmental safeguards to expedite the process. Two months later, EU Commission representatives met with their counterparts of the Brazilian Ministries of Economy and Foreign Affairs, but negotiations failed due to the upcoming general election in Brazil.

The Chairman of a leading political think tank in Brazil was exhausted, “Negotiating with the EU is like negotiating with a company which brings a new executive with different demands to every conversation. Last November, [the High Representative of the EU for Foreign Affairs, Josep] Borrell said that at COP26 meeting he welcomed Brazil’s environmental commitments and, a year later, the European Parliament condemns [President Jair] Bolsonaro’s human rights and environmental policies [following the killings of environmentalist Bruno Pereira and journalist Dom Phillips in the Amazon]. But let’s not lose sight of the big issue here, which is the EU’s agricultural protectionism.”

“Negotiating with the EU is like negotiating with a company which brings a new executive with different demands to every conversation.”

Chairman, political think tank, Brazil

A former EU diplomat concurred, “Brussels needs to diversify food supply, but member states still have their own agendas. France is the most protectionist country in agricultural terms and [President of France Emmanuel] Macron is not exactly a reformist when it comes to agribusiness. He has been pushing for mirror clauses, requiring agricultural imports to meet the conditions of French farmers, something almost unattainable for Mercosur producers. After losing control of the French National Assembly [in the June 2022 election] Macron will not risk upsetting such an influential sector which is already shifting to far-right parties that block his legislative agenda. And that’s why in Brazil some of his criticism around the conservation of the Amazon is seen as dishonest.”

These difficulties, together with opposition from European agribusiness associations and environmental activists in EU member states, have forced the EU Commission to develop a plan to split the agreement into parts. The intention being that these parts would only require the approval of sector ministers in the EU Council and from the EU Parliament, as they would exclusively cover common EU policies that would not require the green light from EU member states.

The think tank Chairman was not convinced this would happen, “Some elites in Brussels may be honest about ratifying the deal, but, at the moment, there are too many interests and grey areas to hope for a fast-track ratification in the next months. The election in Italy will not help either. I cannot imagine the third largest economy of the EU which, with in all certainty will have a Eurosceptic government, accepting such a comprehensive FTA without it being approved in its national congress. It would just fuel the anti-EU sentiment in the country.”

“Let’s not lose sight of the big issue here, which is the EU’s agricultural protectionism.”

Chairman, political think tank, Brazil

While Mercosur ministers await the latest technical trade specifications from the EU, Francisco Bustillo, Minister of Foreign Affairs of Uruguay said that he saw a new window of opportunity. Meanwhile, in Brazil, the leading presidential candidate, Luis Inácio Lula da Silva, claimed that he would finalise the EU-Mercosur FTA within six months if he became president.

In the meantime, the EU expects to conclude FTA negotiations with Chile, New Zealand, and Australia before the end of the year, as it seeks to reduce its food and energy dependency on Russia and China. Bernd Lange, Chair of the European Parliament’s Committee on International Trade, said that the agreement with New Zealand, which is only lacking ratification from the EU legislative, was the gold standard for future FTAs, as it will remove tariffs in 91% of New Zealand’s exports while covering most of the EU’s original demands.

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