What is the EU-Mercosur trade deal and why is it important?

PARIS — After more than 20 years of negotiations, the European Union, made up of 27 countries, and Mercosur — a South American trade bloc made up of Brazil, Argentina, Paraguay, Uruguay and Bolivia — are still trying to finalize a major trade deal that is sparking protests from Europeans. farmers.

A draft agreement was announced in 2019, but disagreements over environmental, economic and political issues are delaying its final approval.

Here’s a look at the deal, its importance and the challenges it faces:

What is the agreement about?

It aims to create one of the world’s largest free trade zones, covering more than 700 million people and almost 25% of global GDP. Much like the U.S.-Mexico-Canada Free Trade Agreement, its goal is to reduce tariffs and trade barriers, making it easier for businesses on both sides to export goods.

For the EU, the deal would mean lower tariffs on products like cars, machinery and chemicals. Mercosur countries would benefit from better access to EU markets for agricultural exports such as beef, poultry and sugar.

Negotiations began in 1999 and a first agreement was reached in 2019, but it has still not been ratified due to significant opposition, notably from France.

Why are some farmers opposed to the agreement?

European farmers, particularly in France, fear that an influx of South American products will saturate their markets, to the detriment of local agriculture.

A year after a massive protest movement by European farmers, a new wave of protests has erupted across the continent, with many saying cutting tariffs or duty-free quotas for South American goods could spell doom for them.

For example, 99,000 tonnes of beef would be subject to a reduced tariff of just 7.5%, while 180,000 tonnes of poultry would enter duty-free. According to the European Commission, this represents less than 2% of the EU’s annual beef consumption.

Breeders say they cannot compete with South American producers, who benefit from lower labor costs, larger farms and less strict regulations on practices such as the use of hormones growth compared to European standards.

In October, a European Commission audit found that Brazil, the world’s largest beef exporter, cannot guarantee that its exports to the EU are free of the banned growth hormone estradiol 17-β. in Europe for decades.

Who supports him?

Germany, Spain, Italy and Portugal are among the EU countries pushing for the deal to be finalized by the end of the year. Germany, in particular, sees Mercosur as a key market for its automakers.

In South America, leaders like Brazilian President Luiz Inácio Lula da Silva see the deal as a boost to regional trade and economic growth. Countries like Uruguay and Paraguay also support the deal, hoping to diversify their trading partners and reduce their dependence on China. Argentine President Javier Milei also backed him, signaling a shift from his predecessor’s skepticism.

The agreement is also supported by industries in both regions. European car and pharmaceutical manufacturers see it as a way to access growing Mercosur markets.

Ursula von der Leyen, president of the European Commission, also voiced strong support, calling it “an agreement of great economic and strategic importance” – despite opposition from some EU member states.

Who is opposed to it?

France, which has Europe’s largest agricultural sector, has led the opposition in the EU, alongside Poland, Austria and the Netherlands. French President Emmanuel Macron called for stricter environmental and labor standards, saying “France would not sign the agreement as it is.”

France also asked the European Commission to renegotiate the text, in particular by incorporating “mirror clauses”, which would impose identical standards on products traded between the two blocs.

However, France’s ability to block the deal is limited because trade negotiations fall under the authority of the European Commission, which negotiates for all 27 member states.

Environmental groups including Greenpeace have also criticized the deal, warning it could accelerate deforestation in the Amazon and increase the use of harmful pesticides.

What’s next?

The Mercosur summit on December 5 and 6 in Uruguay could be a key moment for this agreement. However, even if the agreement is signed, it must be ratified by all 27 EU member states, the European Parliament and the national parliaments of all member states before entering into force.

This would give France a chance to veto it.

To speed up and facilitate approval, the European Commission is considering splitting the agreement into two parts: a broader cooperation agreement and a trade-focused agreement. The latter would only require a majority vote under EU rules, bypassing the need for unanimous approval.

Under the plan, France would lose its veto if it failed to muster enough support to form a blocking minority. Although countries like Poland and Austria have raised objections, their combined influence falls far short of the threshold needed to kill the deal.