Europe ‘cannot afford’ to bow out of Mercosur agreement, says academic

The EU's trade pact with Mercosur is at the heart of the debate about sustainable trade chapters in EU trade. [SHUTTERSTOCK]

This article is part of our special report EU agriculture and Mercosur: what is the state of play?.

The crisis of multilateralism, driven by the competition between the US and China, and a lukewarm push from the current leaders of the EU and Mercosur, explains why the agreement between these two blocks is such a challenge, analysts say. EURACTIV’s partner Efeagro reports.

The EU and Mercosur (Argentina, Brazil, Paraguay and Uruguay) closed a deal in 2019 after twenty years of negotiations, but it has yet to be ratified.

France, the Netherlands and Austria, who have been vocal in their criticism of Brazilian environmental policy, have threatened to reject it.

The international context does nothing to ease the tensions as it is a “bad time for free trade,” expert Anna Ayuso, from the Barcelona Center for International Affairs (CIDOB), told Efeagro.

The multilateral system represented by the World Trade Organisation has been strongly questioned by the presidency of Donald Trump, amid protectionist trends in the US and worldwide that the coronavirus crisis may further encourage.

Member state criticism, COVID crisis delay ratification of EU-Mercosur deal

The challenging procedure of ratifying the EU-Mercosur deal is being held up due to a combination of the COVID-19 health crisis and considerable criticism from member states. EURACTIV’s partner Efeagro takes a look at the current state of play.

Protectionist positions

Ayuso believes that the EU has shown “a type of protectionism that relies on environmental protection,” especially regarding the Brazilian Amazon.

The EU-Mercosur deal, she argues, already reflects the commitment to comply with the Paris Agreement on climate change and, as environmentalists demand, it could include an annex establishing mechanisms for monitoring.

She said Latin America is keeping that window of opportunity open and Europe “cannot afford” to back down.

It is not only an issue of the image or defence of multilateralism but also a way for the EU to strengthen its ties in a region where Washington maintains a strong influence and China “is getting a large share of the cake.”

Commercial competition

If the EU “withdraws” from Mercosur, China stands to gain in power, and this will also benefit other Asia-Pacific competitors such as India or Indonesia, according to Roberto Tornabell, the emeritus professor of economics and finance at the Esade business school.

“Globally, only Latin America remains as a major agricultural supplier,” Tornabell underlined.

He believes that, under the reluctance of countries like France, there lies a desire to protect their farmers from agricultural imports. As such, he proposes to provide a compensation scheme to those who are affected.

The professor defends the latest trade agreements between the EU and countries such as Japan or Canada, in contrast to the tensions caused by the tariffs Washington has imposed on European products as a result of the Boeing-Airbus dispute and the tough Brexit negotiations.

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A leaked version of the EU-Mercosur treaty negotiation text, published by Greenpeace Germany, has no provisions to ensure the Paris climate agreement is enforced, leaving the door open to further deforestation in the Amazon, campaigners say.

Partners weakness

The EU has been weakened because of the undermining of the multilateral system, but also due to its own internal fractures and a tenuous relationship with the US, according to Ignacio Bartesaghi, dean at the Faculty of Business Sciences of the Catholic University of Uruguay.

As he points out, the agreement between the EU and the Mercosur was driven by the “geopolitical interests” of both sides, although it is now suffering from a lack of leadership.

If former presidents Mauricio Macri (Argentina) and Michel Temer (Brazil) pushed the negotiations in order to create new markets after the previous economic crisis, their successors, Alberto Fernández and Jair Bolsonaro, have not seen it the same way.

Argentina, with serious economic problems, has chosen to tighten its links with China in recent years and Brazil has just signed new trade facilitation agreements with the US, while it continues to allocate a third of its exports to the Chinese market.

Bartesaghi also lamented a lack of European leadership, saying that German Chancellor Angela Merkel is currently “on the way out” and French President Emmanuel Macron is under “internal pressure.”

Long term vision

Beyond economic issues or standards, the agreement is – in his opinion – “a geopolitical bet to obtain a great differential with respect to the US and China” in a context of strong competition.

Bartesaghi clarified that “the world has changed three times in twenty years and the possible benefits of the deal in the past have nothing to do with the impacts nowadays.”

According to the analyst, its entry into force would mean a leap in cooperation and would generate good practices and improve the image of the Mercosur by associating it with Europe. It would also give the EU an instrument to enhance investments and policies in the medium and long term, he added.

The University of Buenos Aires researcher Damián Paikin stressed that, for the Mercosur, the agreement is “an opportunity to relocate itself on the Atlantic axis,” after years of growing Chinese influence in the region.

The coronavirus pandemic, he explained, has caused a sharp drop in interregional trade and an even bigger dependence on China, a country that has recovered and continues to import Argentine and Brazilian soybeans.

“Global change seems to be quite clear: either an agreement is reached between the powers of the EU and the US, allowing other actors to participate, or other alternatives will be developed like the model China proposes,” Paikin said.

[Edited by Zoran Radosavljevic]

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