Photo. EC/EU
On September 3, European Commision formally approved the free trade agreement with Mercosur bloc (Argentina, Bolivia, Brazil, Paraguay, and Uruguay). After 25 years of drawn-out negotiations, the deal keeps returning like a boomerang to the political agenda. Certainly, this topic creates a lot of controversy and divides the EU into those who support the deal and those who oppose it.
The free trade approved last week includes two legal instruments: the EU-Mercosur Partnership Agreement (EMPA) and the interim Trade Agreement (iTA). The second one will be repealed and replaced by the EMPA once the ratification process is completed and the deal enters into force. For sure this comprehensive mechanism proves that the European Commission would like to implement this agreement as soon as possible.
Based on the accord the EU together with Mercosur countries will create a 700-million-customer free-trade area, the world’s biggest which is supposed to strengthen Brussel’s position as a global leader. It is one of the key pillars in the bloc’s push to open new markets. According to Ursula von der Leyen,EU businesses and the EU agrifood sector will immediately reap the benefits of lower tariffs and lower costs, contributing to economic growth.
Background for the agreement
Even though negotiations lasted 25 years, current international dynamics strengthen the need to speed up the process. The first one is related to growing Chinese position as an industrial producer in the South America which is perceived by EU as a great competitor. Thanks to deal with Mercosur, Brussels would like to strengthen its position towards Beijing. The situation was also worsened by the Donald Trumps’s tariffs policy which imposed 15% duties on EU goods.
Certainly, the potential to expand the cooperation is meaningful as Mercosur’s second-largest trading partner in goods, exporting products worth €57 billion in 2024. Moreover, the European Union accounts for a quarter of all Mercosur trade in services, with exports from Brussels to the region reaching €29 billion in 2023. Worth highlighting that the EU is the biggest foreign investor in Mercosur, with a value of €390 billion in 2023.
The consequences of EU-Mercosur deal
Based on the scope of the agreement, tariffs will be removed on 91% of EU exports over a period of 15 years. Relaxation of customs policy will cover meat (mostly beef and poultry), sugar, honey and soybeans. Similar actions will be taken by the European Union – progressively remove duties on 92% of Mercosur exports throughout the next decade. The range of products includes cars, chemicals, wine and chocolate.
The main objective is to increase bilateral trade and investment, lower tariff as well as non-tariff trade barriers – mostly for small and medium-sized enterprises. The deal will be beneficial for two groups of member states – industrial producers such as Germany and countries that have already been active in Latin America, including Spain.
Disagreement and fear of European farmers
The strongest opposition has emerged from Paris and Warsaw, reflecting the significant role of France and Poland in agricultural production. The agri-food sector is only part of this agreement, but undoubtedly the most sensitive one because it affects a sector that was once one of the pillars of European integration. Currently European farmers are afraid that a flow of cheaper farming goods could undermine domestic producers, posing a potential threat to regional food security.
European Commision is reassuring main critics that agreement contain „robust” safeguards to protect farmers. What is more EU-Mercosur agreement is guarantying transition mechanism – at least 10 or 15 years which is supposed to reduce the inflow of the Southern American products. But the consequences of creating the free trade zone will be irreversible.
Still, it is possible to block this agreement but to achieve that it is required to collect blocking minority – a coalition of at least 4 countries with a minimum of 35% of the European population. For the most time, France used to show strong opposition, but recently this voice has weakened. At this time, Poland is the most vocal in its opposition, although without its coalition partners, nothing can be achieved.
While analyzing the main objectives of this agreement, Brussels« hypocrisy cannot be dismissed. European agriculture faces constant challenges that must be addressed. On the one hand, the highly restrictive requirements imposed by the Green Deal, on the other, the influx of competitive grain from Ukraine that does not comply with the stringent standards applied to European farmers. These factors have created significant challenges, and similar dangers will be created by the Mercosur products. As a consequence, European farmers will be forced to confront unfair competition from the South America. It is disappointing that the European Union, in finally considering the competitiveness of its economy, is sacrificing domestic agricultural production. Unfortunately, the latest actions by the European Commission in terms of trade policy show that the EU is strong against the weak but weak against the strong.