EU-Mercosur, a key opportunity to access larger markets

On Wednesday, the European Commission approved the official texts, translated into 24 languages, of the agreement to liberalise trade and investment with Mercosur (Argentina, Brazil, Paraguay and Uruguay) and create a free trade area representing more than 20% of world GDP with 720 million consumers. Despite opposition from several member states, notably France and Poland, Brussels has taken the final technical step, now it is up to the politicians to ratify it - with a simple majority in the European Parliament and a qualified majority in the Council.

There is no doubt that this is a dossier of paramount importance. Barely nine months have passed since Ursula von der Leyen signed the preliminary pact in Montevideo, and the international framework has changed profoundly. In terms of trade policies, what were then fears, certainly well-founded, of a protectionist squeeze in the United States, have become the certainty of reciprocal tariffs set by the US administration. Brazil is, together with India, the country most affected, with 50% tariffs, for the European Union it is 15%, while for the other, smaller, Mercosur members it remains at 10%. In this context, it becomes crucial and urgent for both blocs to redouble their efforts to access large markets with promising purchasing power.

The treaty is also important for its geopolitical dimension, as shown by recent frequent bilateral contacts. Emmanuel Macron, in particular, received his Argentine and Brazilian counterparts during the summer, respectively in Nice for the UN Summit on Oceans and in Paris for a state visit to commemorate the bicentennial of bilateral diplomatic relations. They all hope for a rapid ratification of the agreement, but while there is a concordance of views with Lula on climate and environmental issues, as well as on pandemics, dialogue is much more difficult with Joaquim Milei. It is crucial for Europe to send a political message of confidence in the multeralism of rules and rejection of arbitrary decisions.

In a trade agreement, you cannot win on all fronts at once, it is a give and take. Mercosur is a very protected area for industrial products, such as cars, pharmaceuticals, or machine tools, but also for some agri-food products such as wines or cheeses. The treaty improves access conditions for European producers (by protecting geographical indications, for example) and does the same for service providers, while opening the EU market to South American exporters. The criticism that the interests of large industrial groups have prevailed over the protection of rural producers seems specious: tariff reductions on agricultural products are very low and imports remain subject to quotas. And in any case, for beef, these imports account for little more than 1% of consumption. What we can legitimately call for instead is a strengthening of product traceability, with border controls to ensure compliance on the European market. In the same way, the treatment of an issue such as deforestation can be improved. The entry into force of the directive against imported deforestation, scheduled for December 2024, has been postponed until the end of the year, a deadline that must be respected.

Latin American countries are losing patience with European hesitations and sluggishness, but all is not lost. The ideal would be to formalise the agreement once and for all in December, taking advantage of the Danish presidency, i.e. a country that defends economic liberalisation but is at the same time attentive to sustainability. For Mercosur it is Brazil's turn, by far the most important country. Enthusiasm and political gravitas can serve to overcome the impasse created by the lobbying of farmers, NGOs and humanitarian organisations of the Christian churches and prevent the Southern Cone from turning inexorably towards the Global South (Brazil and Paraguay) and the United States (Argentina). An economic and political luxury that Europe cannot allow itself. Already today China accounts for a quarter of Mercosur's trade (2% in 2001), Europe for barely a sixth (almost a third in 2001).