European Commission welcomes trade deal with Mercosur bloc – DW – 07/12/2024

“Today marks a truly historic milestone,” European Commission President Ursula von der Leyenon said in Montevideo on Friday, as the EU and trade bloc Mercosur finalized their deal. She said a “powerful message to the world” had been sent.

“In an increasingly conflictual world, we are demonstrating that democracies can count on each other.”

Von der Leyen added that the deal, which lasted nearly 25 years, was “one of the greatest trade and investment partnerships the world has ever seen.”

Connecting Europe to South America

The EU-Mercosur agreement connects more than 700 million people across the European and South American continents. Some 450 million citizens in 27 EU states and around 270 million in Brazil, Argentina, Uruguay and Paraguay.

It does not yet apply to the new member of the Mercosur trade bloc, Bolivia, nor to Venezuela, whose membership in the bloc has been suspended until further notice due to democratic backsliding.

Most of the key points had already been agreed in 2019. The deal will remove more than 90% of customs duties on goods traded between the two blocs, which the European Commission says will allow EU exporters to saving more than 4 billion euros ($4.2 billion) per year.

Rare earth elements needed for cars and machines

From an EU perspective, the focus will likely be on the import of raw materials and the export of cars and machinery. The bloc’s interest in finalizing the deal has become even more acute following the re-election of US President-elect Donald Trump, who threatened the EU with tariffs during his campaign.

Given the global geopolitical situation, von der Leyen said the agreement was “a political necessity.” The EU hopes to become less dependent on China for its access to rare earths, for example. Mercosur states will be able to supply the EU with these crucial raw materials for modern technological products, such as mobile phones and electric vehicles.

In 2023, according to the EU, Mercosur states exported mainly mineral products, food, beverages and tobacco to the EU, which in turn exported machinery, equipment, chemicals and pharmaceuticals. The volume of trade between the two blocs that year amounted to around 110 billion euros.

In the EU, notably in Germany, automakers are likely hoping that 35% import duties on cars will be reduced, while South American producers hope they will be able to more easily sell meat, sugar and other similar products to the European market. EU.

Environmental protection under threat, critics say

Over the past five years, reaching this deal has proven difficult, largely because the EU has demanded stricter environmental regulations. These will be specified in an additional protocol. In its press release, the European Commission highlighted that the current agreement contains “strong, specific and measurable commitments to end deforestation”.

Criticism of the deal has also been voiced in South America in recent years. During his 2023 election campaign, Argentine President Javier Milei expressed opposition to the agreement, and Brazilian President Luiz Inacio da Silva also criticized the additional protocol.

European farmers oppose the agreement

In recent weeks, the deal has also sparked vehement protests from EU farmers, notably in France and Belgium. They fear unfair competition from cheap South American products, arguing that producers in these countries benefit from lower environmental standards. The German Farmers’ Association also spoke out against the deal, calling for negotiations to resume.

Environmental organizations such as Greenpeace have roundly rejected the deal, arguing that continued deforestation of the rainforest to produce beef and grow soybeans to feed livestock would be catastrophic.

Supporters of the deal say it will protect European standards as well as quotas in certain areas, such as beef, poultry and sugar. The European Commission said on Friday that the interests of all Europeans, including farmers, would be protected by the deal.

EU member states at odds

Opinions on the deal also differ within the EU. France is a staunch opponent of the deal and on Thursday President Emmanuel Macron’s office said he had told von der Leyen that he considered it “unacceptable” in its current form. He declared that France would continue to tirelessly defend its “agricultural sovereignty”.

Poland and Italy have also expressed doubts, while Germany and Spain both support the deal. Recently, Germany has increasingly insisted on a rapid conclusion.

Although the agreement has been finalized, it will likely be some time before it actually comes into effect. Both blocs will have to ratify the agreement, but it could still be blocked. The European Commission said ending negotiations was a “first step”.

EU-Mercosur trade deal: the story of two cattle breeders

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This article was originally written in German.