The agreement reached by the European Commission contains new provisions which seek to respond to the opponents of the agreement. But the process that must follow the political agreement reached on Friday is far from a done deal for the European executive.
Just three days after the announcement of the conclusion of the Mercosur agreement, farmers’ tractors were already making themselves heard, Monday, outside the building of the Council of the European Union, where the 27 European ministers for agriculture were gathering.
Organised by the farmers European lobby, COPA-COGECA, and Belgian farmer unions, the demonstration denounced the unfair competition that European farmers would suffer once the Mercosur Agreement enters into force.
“We cannot find in this agreement any benefits for the farmers,” COGECA’s president Lennart Nilsson told Euronews, “we want reciprocity in the standards of production in the Mercosur countries and in Europe.”
After 25 years of negotiations, the Mercosur agreement was signed on 6 December between the European Union and the Mercosur countries-Argentina, Brazil, Paraguay, and Uruguay. It will create a free trade area covering 780 million people, with a crucial market of 280 million consumers in Latin America for European companies, 30,000 of which are already operating in the area. Customs duties, currently between 10% and 35%, will gradually disappear on most products, the European Commission is expecting a boom of European exports in wine, spirits, and dairy sectors.
Agricultural and environmental concerns have always been at the heart of preoccupations since a group of countries led by France opposed a political agreement reached with Mercosur countries in 2019. What has changed since then? “We have listened carefully the concerns in our constituencies,” a Commission senior official said after the deal was announced on Friday. One of the key elements of the new agreement, brandished by the European Commission, concerns environmental standards.
As France and environmentalists have long been calling for, the international treaty signed in 2016 during the Paris COP, has become an “essential element” of the Mercosur agreement. It means that if these environmental standards are not respected by one or other of the parties, the agreement may be partially or totally suspended. “This is only our third free trade agreement to include such a clause, after those with New Zealand and the United Kingdom,” the same official added.
Another big change is the legally binding commitment of Mercosur countries to halt illegal deforestation by 2030. This is a first for a trade agreement. Deforestation was at the heart of negotiations in recent years. The subject had blocked discussions when Jair Bolsonaro led Brazil between 2019 and 2022, but it finally found its way onto the negotiating table. As soon as 2025, “only ‘deforestation-free’ products will be allowed to enter the EU market, including soya, beef, palm oil, timber, cocoa and coffee”, another Commission senior official detailed. The Mercosur’s commitment also includes the respect of the rules on deforestation which are currently being adopted at the EU level.
In the agricultural sector, not much has changed since 2019. The Commission had already negotiated quotas for the importation with lower tariffs of sensitive products such as beef, poultry and sugar. They will be gradually phase in within the seven years following the agreement’s ratification. The big news is the decision of the Commission to set up a reserve of €1 billion, “in the unlikely event that the European agricultural sector suffers negative repercussions” the same official said, adding: “It’s our insurance policy for farmers and rural areas.”
The car industry was also a crucial topic in the negotiations for both side of the Atlantic, as the Europeans, hit by Chinese competition, are looking for new markets. To protect their industry, the Mercosur countries have obtained a longer period before the full suppression of tariffs on electric vehicles and hybrid cars. Instead of the 15 years provided for in the 2019 agreement, the tariffs will be suppressed 18 years after the entry into force of the agreement. Tariffs will however automatically drop from 35 to 25% for European car exports.
What comes next? The political agreement reached by the Commission and the Mercosur countries is “just a first stage before a long process”, a Commission spokesperson said Friday. Indeed, once translated, the agreement will be presented to the Council, whose adoption is required for its signature. This is where the battle will be fought over the coming months.
“The Commission has completed its negotiations with Mercosur, which is its responsibility, but the agreement has neither been signed nor ratified. So, this is not the end of the story,” warned the Elysee on Friday evening. France, the main opponent to the agreement, is trying to build a blocking minority against the deal.
Poland has already expressed its opposition. The vote of Ireland, the Netherlands and Austria remains uncertain. But for France, the key ally will be Italy, as the blocking minority requires four member states representing 35% of Europe’s population. So far, Italy has been in favour of the agreement, provided that it contains guarantees for its farmers. “Italy will support the deal” a Parliament official predicted, “car equipment suppliers of Lombardy depend on the mighty German car industry whose interest is to export cars to Latin America.”
The MEPs are also already at work. As once signed by the Council, the agreement will reach the Parliament which has to give its consent to its conclusion. The MEPs’ approval is not guaranteed. The position of Fratelli d’Italia, the party of Italian Prime minister Georgia Meloni, will be scrutinised there too.
