Mercosur-EU agreement unlikely in 2024

French President Emmanuel Macron’s recent statements against the Mercosur-EU agreement illustrate the bad political moment to move forward and end the negotiations in 2024, according to experts interviewed by Brazilian press agency Valor. The situation in the second half of last year, when Brazil and Spain temporarily led the blocs, was a strategic opportunity to move forward with the terms of the partnership, which was never concluded. Now, pressure from European farmers—important players in the bloc’s domestic politics—is causing governments like France to take a firmer stance against the agreement.

Another factor hindering a possible conclusion of the negotiations this year, according to experts, is the European Parliament elections in June, which tend to reduce the number of pro-agreement politicians. In this scenario, where it seems clear that the negotiations will once again be paralyzed, Mr. Macron is taking the opportunity to feed protectionist rhetoric supported by the French, said business school FGV international relations professor Oliver Stuenkel.

“It’s an unpopular deal, and Mr. Macron is weakened. This is a signal that it’s politically possible to satisfy the demands of different groups at little cost. All of environmentalist civil society is against the deal, as is French agribusiness,” he said. “It is a bit like beating a dead dog because the agreement is already practically dead. The key players in the EU who supported this deal have calculated that it’s not going to happen. His move has little political cost.”

Demonstrations by farmers are taking place even in countries that are considered Brazil’s allies in negotiating the agreement, such as Germany. “There is a perception that in this context it’s not possible to reach an agreement with an agricultural superpower like Mercosur,” said Mr. Stuenkel.

Former ambassador to Paris Marcos Azambuja confirmed the influence that the agricultural sectors maintain in European elections, despite the loss of weight of agriculture in the countries. For the advisor emeritus of the Brazilian Center for International Relations (Cebri), however, the current stalemate in the agreement is not the result of “serious flaws” in the negotiations.

“The issue was and is, of course, very complex, and over the years Brazil has increasingly presented itself as a major player in world food trade, a trend that should continue,” he said. “This is not a dispute between adversaries, but simply the result of interests and priorities that could not be reconciled on both sides.”

Mr. Azambuja’s impression is that the project will face “almost insurmountable” difficulties in being revived in its current form. France’s categorical opposition, the ambassador added, echoes the concerns of other Europeans whose economies are largely based on agriculture. “I don’t think it can be reversed in the short term,” he said.

The ambassador’s main concern is that a possible rush to consolidate the agreement will lead to an attempt to accept “amendments and additional requirements that would make it even more inadequate.” Large bureaucracies, he said, don’t like to admit that they haven’t achieved a good result after so many years of negotiations. “I’m afraid of last-minute efforts to salvage agreements at the expense of new and even greater concessions that would mainly affect us,” he said. Last year, the Lula administration complained mainly about European restrictions on government purchases and environmental requirements that could lead to sanctions against Mercosur countries.

Economist Sandra Rios, director of the Center for Integration and Development Studies (Cindes), sees the agreement as a politically convenient “scapegoat” for Mr. Macron in the face of the European agricultural scenario. The sector’s protests, she said, are more motivated by the increase in costs suffered by European agriculture due to decisions on energy transition and the tightening of environmental laws.

“The Mercosur-European Union agreement comes in to complicate or create an additional element that is not directly involved in the recent problems,” she said. “The problem now seems to be more Europe’s than Mercosur’s. The political window is closed. That doesn’t mean it’s impossible, but at least for 2024 the context has become more difficult, especially because of the political problem in Europe.”

The economist’s observation is followed by a lament: “It’s a huge loss of opportunity for Brazil, Mercosur, and the European Union also from a geopolitical point of view.” She added: “In a scenario where I have serious doubts about where the technological and political conflict between the United States and China is heading, the Mercosur-European Union agreement would provide a framework for creating a more favorable business environment between the blocs, with more predictability for business development and investment, and more clarity on market access conditions.”

See below which were Brazil’s top exports to the EU last year. The data is from Datamar’s DataLiner.

Top Exports to the EU | Jan 2023 – Dec 2023 | TEUs

Source: DataLiner (click here to request a demo)

This year has been described by analysts as a year of uncertainty, and Mr. Stuenkel agrees. In addition to the two aspects that are always highlighted—the ongoing wars and the elections in the United States—the professor cites the internal aspects within Mercosur, such as the still undefined position of Argentine President Javier Milei and the elections in Uruguay, a country that has been the most rebellious voice of the bloc in recent years.

“I’ve defended this agreement for two decades, but now I think it’s best to close the issue. The opportunity cost is significant. There’s hardly going to be an announcement that it’s over, but there has to be a sense of turning the page so that Brazil can decide what it wants from Mercosur, whether it wants to start a free trade negotiation with China,” said Mr. Stuenkel. “Uruguay is debating the agreement with China, and Brazil’s response has been very passive. It’s something that could have major consequences for Mercosur, but it’s not being discussed, partly because of this level of uncertainty.”

Source: Valor International 

Click here to access the original text publication: https://valorinternational.globo.com/foreign-affairs/news/2024/02/02/mercosur-eu-agreement-unlikely-in-2024.ghtml

Sharing is caring!