Despite the frontal opposition of Emmanuel Macronwho tried to stop it with a last-minute phone call, the president of the Commission, Ursula von der Leyensealed this Friday in Uruguay the controversial and gigantic free trade agreement between the European Union and Mercosurwhose negotiation has taken 25 years. A pact championed by the President of the Government, Pedro Sanchezand the German chancellor, Olaf Scholzwhich is based on the exchange of Latin American beef and agricultural products for cars and machinery from the European Union.
In their phone call, Macron told Von der Leyen that the agreement with Mercosur (block formed by Brazil, Argentina, Uruguay and Paraguay) ““It’s unacceptable as it is.”. The Government of Paris maintains that the pact will harm European farmers and puts at risk sustainability objectives and the fight against climate change. “We will continue to tirelessly defend our agricultural sovereignty,” the French president told the German president.
But Von der Leyen has ignored France’s resounding ‘no’, as well as the reluctance expressed in recent hours by the Government of Giorgia Meloni in Italy and sealed the agreement during the Mercosur leaders’ summit held in Montevideo. He also does so in the midst of a political crisis in Paris, after the fall of Michel Barnier’s government, a movement that the French media has interpreted as an affront and a symptom of Macron’s decline and loss of influence.
The result is that the free trade agreement between the EU and Mercosur remains hanging by a thread. To move forward, it has to be ratified by the capitals by a qualified majority and by the European Parliament by a simple majority. Macron is actively working to achieve a blocking minoritywhich requires at least 4 countries that add up to 35% of the European population.
France has already enlisted the support of Poland, Austria and the Netherlands, but it is not enough. The key is therefore held by the Meloni Government, which despite its reservations still does not clearly decide. “The conditions are not met” to sign, Italian government sources have said in recent hours.
Faced with the ‘no’ from Paris and Warsaw and the doubts from Rome, A total of 11 countries sent a favorable letter to Von der Leyen in Septemberin which they urged him to close the agreement with Mercosur before the end of the year. In addition to Sánchez and Scholz, the letter had the signatures of the prime ministers of Portugal, Sweden, Denmark, Finland, Croatia, Estonia, Latvia, Luxembourg and the Czech Republic.
If all outstanding obstacles are overcome, the EU-Mercosur agreement will create a market of 700 million people, which Von der Leyen says constitutes “the largest trade and investment partnership the world has ever seen.” According to Brussels calculations, the pact It will save community companies 4 billion euros a year in tariffs.
We have concluded the negotiations for the EU-Mercosur agreement.
It marks the beginning of a new story.
I now look forward to discussing it with EU countries.
This agreement will work for people and businesses.
More jobs. More choices. Shared prosperity. pic.twitter.com/4E9z1Ztamc
— Ursula von der Leyen (@vonderleyen) December 6, 2024
But in addition, both Von der Leyen and Sánchez highlight the geopolitical dimension of the agreement with Mercosur. It is about sending a powerful message of support for multilateralism and open, rules-based trade just as Donald Trump returns to the White House with his threat of general tariffs. Europeans also do not want to lose ground to China’s growing influence in the region and want to guarantee access to key raw materials for the ecological transition, such as lithium.
According to the agreement, the Mercosur countries will eliminate tariffs on 91% of goods imported from Europe, among which are key industrial export products for the EU, such as cars (which now suffer a 35% surcharge) and the machinery (up to 20%). But also key agricultural sectors for Europeans such as wine (which currently has a 27% penalty) or olive oil (10%).
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In turn, the EU will liberalize 95% of imports of goods from Mercosur, including 82% of agricultural products. However, the most sensitive for Europeans – such as beef, chicken, sugar, rice or honey– will still enjoy some protection. Generally, tariff reductions take place over a period of 10 years from the ratification of the agreement.
The pact guarantees the protection of 357 Geographical Indications of food and beverages of the EUof which 59 are Spanish. Among them, saffron from La Mancha, cecina from León, ham from Jabugo, citrus fruits from Valencia, nougat from Jijona, olive oil from Antequera, cheese from Mahón, wines from Jerez, Rioja, Ribera del Duero, Priorat, Somontano or Bierzo or the pacharán of Navarra.
According to a study prepared by the Secretary of State for Commerce, Spain’s exports to Mercosur will grow by 37%when the agreement has deployed all its effects, which will lead to greater production (0.23% of GDP) and employment (0.11%, equivalent to more than 22,000 jobs) in the majority of Spanish productive sectors. In terms of services, the agreement eliminates obstacles in sectors of great importance for Spain, such as financial services and telecommunications.
Despite the support of the Sánchez Government, Spanish farmers associations are also against of the free trade agreement between the EU and Mercosur. They complain that they will have to compete with Latin Americans at a disadvantage, since they must comply with much more demanding environmental and food safety standards.
In reality, the pact with Mercosur, whose negotiations began in 1999, It was provisionally closed in June 2019but has since run aground again. To respond to the concerns of both parties, Brussels has negotiated in recent months an additional chapter on sustainability (which would address issues such as the fight against deforestation and climate change). The next few weeks will be decisive to know if the agreement is approved or finally shipwrecked.
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