24 years of EU-Mercosur trade talks come to nought

RASHMEE ROSHAN LALL December 7, 2023
Vietnam's Hai Phong International Container Terminal in July 2022. Photo by Nathan Cima on Unsplash

Free trade has nothing to lose but its chains

Today (December 7) should have been a cathartic moment for Mercosur, a South American free trade bloc, as well as the European Union (EU), or parts of it anyway.

So too for free trade enthusiasts (some do still exist, believe me).

Today, after 24 years of negotiation, Mercosur and the EU should have announced a massive free trade agreement, an ambitious one that harked back to a golden age in which growth was considered good, competition a benediction and the opening of export markets a sign we could all get along and make a bigger pie to share out.

But there’s no deal and European Commission President Ursula von der Leyen’s December 7 trip to Brazil was cancelled, as was that of EU trade chief Valdis Dombrovskis.

Though the temptation is to blame Argentina’s anarcho-capitalist president-elect Javier Milei for the lack of a signed agreement, that doesn’t appear to be true.

In fact, Mr Milei’s incoming foreign minister has said he will back an agreement with the EU and urged the outgoing guy, President Alberto Fernandez, to sign the deal. Interestingly, it was Mr Fernandez who confirmed, one week before Mr Milei’s December 10 inauguration, that he would not put pen to paper. He suggested that he was doing this because the deal was too favourable to EU industrial exports and too restrictive for South American agricultural exports.

Apparently, Mr Fernandez’s reservations are echoed by European heavyweights such as France’s Emmanuel Macron. He hasn’t concealed his displeasure at a Mercosur agreement with the EU, arguing that it goes against the interests of French and EU farmers and is a hopeless relic. “It’s a deal that was negotiated 20 years ago and which we’ve tried to mend, and which has been badly mended,” Mr Macron has said.

With such a low level of enthusiasm, it’s entirely possible that any EU-Mercosur deal will end up in the political deep freeze.

There are two reasons for this. Spain, which currently holds European Council presidency, strongly advocates a pact but its time is up this month.

Powerful European farming groups and environmental organisations are opposed to any deal with South American countries and European elections are approaching. This means it’s rather less likely that European politicians will find it in their hearts to be brave (read, foolhardy) enough to invest political capital in a controversial decision.

If it’s any consolation, an Mercosur-EU pact is not the only trade deal hanging in the balance. A proposed EU agreement with Australia has also suffered a setback and the US has slowed plans to roll out a relatively unambitious Asia-Pacific pact.

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