26 years after the start of negotiations, the trade agreement between the European Union and Mercosur (Argentina, Brazil, Paraguay and Uruguay) takes the last step towards its signature. The new safeguards and the advance of money for agriculture in the next multiannual EU budget have managed to convince Italy to tip the balance in favor of yes and achieve the necessary majority among European countries to approve the trade agreement.
In the corridors of the European institutions it is assumed that the agreement goes beyond its economic dimension. It is the EU’s response to Donald Trump’s foreign policy that flouts consensus and international law, just at a time when the US president is accelerating his version of the Monroe doctrine, with military intervention in Venezuela or threats to other countries such as Colombia or Mexico.
“For Europeans, finalizing free trade agreements with new partners is among the best responses to US tariffs, growing protectionism and trade tensions with China. The agreement is not just about economics. Latin America is a region of intense competition for influence between Western countries and China. Not signing the free trade agreement between the EU and Mercosur risked bringing Latin American economies closer to Beijing’s orbit. The conclusion of the agreement also signals that Europeans are seriously interested in diversify their export markets away from the US,” explains Agathe Demarais, Policy Researcher at the European Council of Foreign Relations (ECFR).
European Commission President Ursula Von der Leyen is expected to travel to Paraguay next week (the most likely date is January 17) to sign an agreement that will create the world’s largest free trade area with 780 million citizens. The European institutions have sold the treaty as very favorable for the EU economy, since it will give a boost to European industry because it will boost sales of machinery and vehicles. The Commission’s calculations indicate that European companies will increase exports by 84 billion euros, including agricultural products such as wine or cheese. The agreement eliminates more than 90% of tariffs on European exports, which will save companies on the continent more than 4,000 million euros annually in tariffs.
The President of the European Council, António Costa, noted that “today is a good day for Europe and for our Mercosur partners”, as it is “important for European sovereignty and strategic autonomy: with this agreement, the EU is shaping the global economy” and “demonstrates that rules-based trade agreements are equally beneficial for all parties”.
Although the agreement has not had the approval of countries such as France, Ireland, Poland or Hungary, Italy has been convinced to achieve the support of at least 15 of the 27 EU member states, which represent 65% of the EU population. Both Spain, Germany and the Nordic countries have supported this trade agreement.
In the case of France, its opposition responds more to Emmanuele Macron’s internal political problems, since the latest proposals to revise the treaty convinced the French delegation. The far-right in France is using the trade agreement as a political weapon against Macron.
More money and safeguards for European farmers
The unlocking has been possible after concessions from the European Commission. Ursula Von der Leyen proposed to the EU Agriculture Ministers this Wednesday the advance of up to 45 billion in aid planned in the next budget of the Common Agricultural Policy (CAP). The funds allocated to the CAP corresponding to the period 2028-2034 amount to 300,000 million euros, of which 293,700 million would correspond to income aid and 6,300 million would be dedicated to possible crises.
In addition, safeguards have been expanded to protect European farmers. Diplomatic sources have indicated that “the bilateral safeguard mechanism is confirmed, which provides for provisions that allow the EU to temporarily suspend tariff preferences on imports of certain agricultural products in the event of disturbance of the EU market” with an average of three years.
Sources from the rotating presidency of Cyprus have explained that it has also been agreed to “reduce the threshold for initiating investigations on sensitive agricultural products from 8% to 5%.” The Community Executive has also committed to lowering the maximum levels of pesticides allowed in products imported from the Mercosur area, in addition to trying to reduce the cost of fertilizers used in the EU.
The President of the Government, Pedro Sánchez, commented on the social network Sánchez launched a clear message to differentiate himself from Donald Trump’s foreign policy: “In today’s world, not everything is tariffs, threats and bad news. Some of us build new bridges and alliances to forge shared prosperity.”
The Spanish Ministry of Economy celebrated the approval of the agreement between the EU and the Mercosur countries as “a historic step”, which reaffirms the commitment “to the rules-based international order, multilateralism and cooperation”.
From the Ministry headed by Carlos Cuerpo, it was recalled that Spain “has a significant weight in total EU-Mercosur trade, representing 9% of exports and 18% of total imports from the EU to Mercosur in 2024. Spain also occupies a prominent position as an investor in the countries of the region (we are the first investor in Uruguay, the second investor in Brazil and Argentina and the fifth in Paraguay). The stock of Spanish direct investment in the bloc exceeds 100,000 million euros (2023 data), equivalent to 13% of the Spanish investment position abroad.”
Rejection from farmers and environmentalists
Despite the increase in safeguards and the flexibility of the European budget, Spanish farmers do not agree with the signing of the trade agreement with Mercosur. For months now, both in Spain and in the rest of Europe, there have been protests by farmers arguing that Latin American products will flood the European market.
Asaja, an agricultural association included in CEOE, expressed its opposition to the agreement in a letter addressed to the Minister of Agriculture Luis Planas. The agricultural employers’ association warns of the “serious impact” that the agreement would have on sensitive sectors “such as beef, poultry, sugar, ethanol, citrus, rice, honey or corn.” He also denounced “the lack of reciprocity in the health, environmental and traceability standards required of imported production compared to European ones.”
The general secretary of COAG, Miguel Padilla, considers that the trade agreement will be the “final touch” for a sector that has been used as a “bargaining currency.” “There has been a distribution of stickers, cows have been distributed for cars, for other interests that are, of course, not part of our activity and that is the finishing touch,” Padilla stressed.
However, the general secretary of UPA, Cristóbal Cano, has indicated that the pressure exerted by farmers and ranchers has allowed a “better agreement.” “The pressure we have exerted in the streets, and also in the meetings we have had with different commissioners in recent months, has borne fruit and we have achieved a better agreement than initially anticipated,” Cano celebrated.
“An attractive scenario is opening up for trade. We cannot put a blindfold on our eyes. We know that the geopolitical and commercial context is complex, in the short and medium term we need a rule or trade agreements based on rules, where we know what to expect and work in that direction,” said the Secretary General of UPA.
Environmental organizations have also opposed the trade agreement. Ecologistas en Acción has expressed its support for European agricultural organizations that have blocked borders and roads to denounce the impact of the agreement on agriculture and that denounce that the supposed agricultural safeguards are insufficient.
“This agreement symbolizes a trade policy that confronts and makes farmers on both sides of the Atlantic compete even more – if possible – in a suicidal race to cut social, environmental and health laws. This model of industrial agriculture based on exports is the biggest cause of the climate and environmental emergency and compromises the ability to produce food,” the NGO stated.
Meanwhile, the Spanish Federation of Food and Beverage Industries (FIAB) has highlighted the “importance and opportunity” of the trade agreement. The food and beverage employers’ association has reiterated the “importance” of mirror clauses so that the same standards of quality, safety and European health and environmental regulations are guaranteed for products from Mercosur countries that arrive in Europe.
An agreement to reduce China’s influence
In the geopolitical context of struggle for critical materials and rare earths, “the agreement supports Europe’s efforts to find new sources of critical raw materials, since the Mercosur countries have vast reserves of critical raw materials that will be crucial for the EU’s green energy transition. Brazil has around 20% of the world’s reserves of graphite, nickel, manganese and rare earths, in addition to 94% of the global reserves of niobium, a metal used in the sector. aerospace and is on the EU’s list of critical raw materials. Meanwhile, Argentina has the third largest reserves of lithium in the world, a key input for electric vehicle batteries,” explains Agathe Demarais.
The ECFR analyst emphasizes that the trade agreement “supports Europe’s efforts to reduce economic dependence on China.” Among other reasons, it “reduces tariffs on EU exports to Mercosur economies, especially for chemicals (currently with a tariff of 18%) and machinery (with tariffs between 14% and 20%)”, and could make it easier for “EU companies to develop production lines in Latin America instead of China.”
Source: www.eldiario.es
