There are signs that the free trade agreement between the European Union and the Latin American trade bloc Mercosur, which has been a saga for years, is finally coming to an end.
According to a report in the Financial Times (FT), the EU and the Mercosur group of five South American countries are aiming to conclude negotiations on the long-delayed trade deal before the end of the year after making progress in resolving contentious issues.
Officials on both sides told the FT there was new momentum to conclude the deal, which has been two decades in the making despite French objections. “This is a geopolitical and economic necessity,” said one EU diplomat.
Another diplomat involved in the talks said: “We still have some important issues. It is not easy, but we have made a lot of progress”.
Mercosur, which includes Brazil, Argentina, Uruguay, Paraguay and Bolivia, is important for EU exporters.
According to the European Commission, the agreement creates a market of 780 million people and saves European companies more than €4 billion a year in customs duties. EU companies have investments worth €330 billion in the five South American countries.
France stands alone in opposing the deal
Talks were dealt a blow in January after French President Emmanuel Macron stepped up his opposition to the deal, saying it would harm the environment and expose farmers to unfair competition.
According to the FT, only Austria backed France, which is not enough to block the deal, which needs the approval of a majority of the bloc’s 27 governments.
EU officials say they are prepared to confront French opposition and insist the deal includes a commitment to implement the Paris Agreement, which pledges to keep global warming below 1.5 degrees Celsius.
Germany, Spain and many other member states have been pushing for the agreement, which was signed in principle in 2019 but has been in limbo since. Supporters believe it will strengthen economic and trade ties between the two blocs at a time of heightened global tensions.
Ursula von der Leyen, who was elected to a second term as commission president last month, had previously pledged to finalise the deal.
Mercosur accuses EU of ‘protectionism’
Mercosur members complain that European environmental concerns mask protectionist tendencies. Brazil was angered by a supplementary letter from Brussels last year seeking to add binding commitments on climate change and deforestation.
Other irritants include a separate EU anti-deforestation law, due to come into force next year, which bans imports of products such as timber, beef and coffee produced on deforested land. One official said Mercosur wanted guarantees that the legislation would not wipe out the benefits of the trade deal for its exporters.
Another bone of contention is Brussels’ pressure on Argentina to restrict the use of protected food names such as Parmesan cheese. The large Italian immigrant community has a long history of producing these delicacies. Brazil, meanwhile, is keen on measures to protect its car industry.
Farmers’ opposition continues in Europe
In Europe, the deal faces opposition from farmers, who have organised mass protests this year over rising costs, falling profits and new regulations as Brussels seeks to cut carbon emissions and improve biodiversity.
Farmers say cheaper products imported from South America are produced to lower standards than those in the EU. They also fear they will be unable to compete as cheap agricultural and livestock products flood the European market.
Technical talks continue
Paraguayan President Santiago Peña told the FT last week that he saw “little appetite for progress from European countries”, but acknowledged that Leyen and Macron were preoccupied with the recent EU and French general elections.
For his part, Argentine President Javier Milei expressed disdain for Mercosur during last year’s election campaign, although he and Foreign Minister Diana Mondino have since said they support the deal.
The Commission said negotiating teams from both sides “remain in contact at technical level to make progress on outstanding issues”.
Brussels is focused on “ensuring that the agreement meets its sustainability objectives while respecting the EU’s sensitivities in the agricultural sector,” it added.
