After 25 years of negotiations, the EU and Mercosur have reached a landmark free trade agreement, overcoming opposition from France, Italy, and Poland. European Commission President Ursula von der Leyen announced this achievement, which aims to reduce tariffs and enhance trade among over 700 million people. While Germany strongly supports the deal, concerns remain regarding competition for farmers and environmental impacts. The agreement’s finalization and approval process will proceed, but resistance from various EU nations could hinder implementation.
After 25 years of negotiations, the EU and Mercosur countries have reached a historic agreement on a free trade zone, overcoming the reservations of France, Italy, and Poland.
The European Commission has successfully finalized negotiations for a significant free trade zone with the South American bloc Mercosur, despite ongoing objections from nations including France, Italy, and Poland. This milestone was announced by Commission President Ursula von der Leyen following the last round of discussions with representatives from Brazil, Argentina, Uruguay, and Paraguay.
The negotiations spanned nearly a quarter of a century. “This agreement marks a triumph for Europe,” von der Leyen stated in Montevideo, the capital of Uruguay. The deal aims to benefit both individuals and businesses, fostering job creation, increasing choices, and enhancing prosperity. “Companies will reap the rewards of reduced tariffs and streamlined procedures,” she emphasized.
Recently, the German government has been particularly proactive in pushing to finalize these negotiations and present the agreement text for a vote among EU states. Germany is optimistic that the trade policy aspect can be approved by a majority vote within the Council of Member States, while member states would only hold veto rights over the political dialogue and cooperation agreements. However, this division of the contract could present legal challenges.
After nearly 25 years of discussions, the EU-Mercosur free trade zone is on the verge of formation, yet substantial resistance persists.
Lower Tariffs and Enhanced Trade Opportunities
The agreement aims to establish one of the world’s largest free trade zones, encompassing over 700 million people. Its primary goal is to reduce tariffs and stimulate trade. The German automotive sector sees considerable potential for boosting exports to South America, especially given the high tariffs that currently hinder trade; only 20,700 vehicles were exported from Germany to Argentina and Brazil in 2023.
Trade policymakers view this prospective agreement as a strategic message to the future U.S. administration and as a crucial step in competing against China. The intention is to demonstrate that effective free trade agreements are far more beneficial for the domestic economy in the long term than isolationist policies that introduce new tariffs and trade barriers. If the agreement falters, it is likely that Mercosur nations would further align economically with China.
A political framework agreement for the creation of this free trade zone was actually established in the summer of 2019. However, it faced skepticism from several EU countries, including France, Poland, and Austria, which led to years of renegotiations. Critics argue that European farmers could face intense price competition and that environmental concerns, such as rainforest destruction in South America, could worsen.
German Chancellor Scholz and Brazilian President Lula have pledged to advocate for the agreement’s implementation.
Germany’s Strong Advocacy for the Agreement
Both the EU Commission and the German government dismiss the criticisms as unfounded, asserting that the overall economic advantages significantly outweigh any potential drawbacks. They emphasize that only products adhering to stringent European regulations will be permitted for import. Additionally, companies within the EU could potentially save billions of euros in tariffs annually. In the previous year, goods valued at approximately 56 billion euros were exported from the EU to the four Mercosur countries, while imports from those countries reached around 54 billion euros. EU estimates suggest that around 60,500 European companies could gain from the proposed free trade agreements.
After finalizing the negotiations, the agreement texts will undergo legal scrutiny and translation into the languages of the contracting nations. Subsequently, the EU Commission will determine whether to present the agreement as a whole or divide it into two parts for a vote. The European Parliament’s approval will be necessary in any case, with a decision anticipated no earlier than the latter half of next year.
Xenia Böttcher, ARD Rio de Janeiro, currently in Montevideo, on the signing of the Mercosur agreement
Resistance from France and Italy
The likelihood of implementing the agreement is in doubt, particularly due to farmer protests in France, as it must also receive approval from national parliaments. The French government has reacted cautiously to the agreement, clarifying that “what is occurring in Montevideo is not a signing of the agreement, but merely the political conclusion of the negotiations,” as stated by Trade Minister Sophie Primas in Paris. “This only binds the Commission, not the member states.” Italy’s Prime Minister Giorgia Meloni has previously indicated that the conditions for the agreement are currently not fulfilled.
In Germany, however, there is widespread support for the agreement. Politicians from the SPD, CDU/CSU, and FDP have recently shown their backing in the Bundestag. Key government figures, including Chancellor Olaf Scholz (SPD), Economy Minister Robert Habeck, and Foreign Minister Annalena Baerbock (both from the Greens), advocate for finalizing the agreement.
‘Geopolitical signal to China and the USA,’ Tina Hassel, ARD Brussels, with reactions to the Mercosur agreement
This topic was reported by tagesschau on December 6, 2024, at 3:00 PM.