BRUSSELS — Slow and steady wins the race — but just how slow is too slow for the EU-Mercosur trade pact?
The European Union and the South American bloc of Mercosur countries have been discussing one of the world’s largest trade deals since 1999 — yet negotiators continue to insist that success is just around the corner.
Trade officials have built entire careers out of the talks, which have seen periods of stalemate alternate with lurching advances, only for them to hit the wall again. It’s been a drawn-out and sometimes absurd drama that has invited comparisons with Samuel Beckett’s “Waiting for Godot”.
“I started my career [on Mercosur] and it will probably not be ratified until I retire,” Michael Hager, a veteran official and top aide to EU trade chief Valdis Dombrovskis, told an event in November.
What’s more, the current political climate could hardly be less favorable to the transatlantic trade deal. Opponents say it would dump beef from Brazil and Argentina on a continent that has been shaken by farm protests ahead of key elections — including the European Parliament in June.
France — the bloc’s fiercest opponent of the accord — last month raised the pressure on Brussels to halt the accord. In a text message to Ursula von der Leyen, President Emmanuel Macron made it clear that he would not support signing it in its current form. It was a power move against the European Commission president, who will need the French leader’s backing to secure a second term.
“Doing it now would be kamikaze,” warned one trade diplomat, granted anonymity due to the sensitivity of the matter.
Diplomats on both sides agree there’s no political momentum to carry the deal over the finish line ahead of the June election. This week’s World Trade Organization gathering in Abu Dhabi will offer ministers an opportunity to take stock but is unlikely to deliver a breakthrough.
Still, the odds can turn in its favor, provided a number of stars align.
Last week, Argentina’s Foreign Minister Diana Mondino said the Mercosur countries — Brazil, Argentina, Uruguay, Paraguay and soon Bolivia — were mulling breaking the agreement into parts. A deal that “makes everyone happy” may not be possible, she said following a meeting with her French counterpart, Stéphane Séjourné.
The deal’s sustainability provisions — and the fact that Mercosur countries could face sanctions if they don’t respect them — remain key sticking points.
Negotiations reached an original political agreement in 2019, only for new obstacles to crop up. In the latest, the Mercosur side is seeking €12.5 billion in sweeteners to help offset the cost of environmental conditions that the EU wants tacked onto the deal.
The deal would create a free trade area spanning nearly 800 million people. While Mercosur countries would remove duties on 91 percent of imports from the EU and fully liberalize imports of passenger cars, Mercosur countries would benefit from better conditions on exports ranging from beef to ethanol.
Does non really mean non?
The EU side is weighing the option of breaking the deal into two parts, a political and a trade agreement — as the bloc recently did with its agreement with Chile — to facilitate its approval once agreement is reached with the Mercosur countries.
Whereas a “mixed agreement” would require ratification in the European, national and some regional parliaments, the Commission could decide to carve out a separate trade deal. This would only need to be approved by the Council of the EU and the European Parliament, enabling faster ratification.
In the unlikely event of a political deal being struck before the European election, the formalities would take many months or possibly years — even if they go smoothly.
France remains key.
“The French government has been trying to derail the EU-Mercosur agreement since 2019, and it is doing so for strictly political and electoral domestic political interests,” Jordi Cañas, a Spanish MEP who heads the European Parliament’s delegation for relations with Mercosur, told POLITICO.
While France isn’t the only critic — with others like Ireland and Austria marching alongside — a shift in its positioning could topple opposition from other countries.
With French parties across the political spectrum opposing the deal, such a scenario is highly unlikely — but not impossible, should the terms of the agreement change.
“Of course, Macron can overrule the farmers and take the political hit,” said Hosuk Lee-Makiyama, director of the European Centre for International Political Economy and a former Swedish trade diplomat.
“He’s a second-term president who doesn’t have anything to lose and, as such, can get away with a lot more. If he sees a deal that is on balance more beneficial for France in total, of course he can go for it.”
Without a French shift, sealing a deal would come at a political price that may well just be too high to pay.
“This would require a lot of political courage from the Commission, with von der Leyen requiring France’s support to secure her next mandate,” one EU diplomat said.
In theory, a qualified majority of EU member countries would be needed to approve a stripped-down trade deal — with 55 percent of EU countries, representing 65 percent of the bloc’s population in favor. But in practice, approval typically takes place by so-called negative consensus — meaning that it can be blocked if an important member country objects.
“The Commission will never bulldoze an agreement past French, German or Italian opposition,” John Clarke, who led the European Commission’s farm trade negotiations until his recent retirement, told POLITICO.
Either way, the final text would also have to be approved by the majority of European lawmakers — and with the next Parliament expected to shift to the right its chances of passing are uncertain.
MEPs from the Greens and the Left, as well as the far right oppose the deal, while the center-left Socialists & Democrats, the center-right European People’s Party and the liberal Renew group appear more in favor. Currently, both the far right and the EPP are expected to score big gains in the election.
Mercosur wish list
Developments on the Mercosur side could also open a window of opportunity.
Under new President Javier Milei, Argentina has shifted and it is now willing to accept a deal based on the 2019 agreement. That essentially means that Buenos Aires no longer backs efforts to secure concessions in exchange for the EU’s sustainability demands.
Argentina’s shift is unlikely to have a huge impact on the position of Brazil, which continues to lead the negotiations on behalf of the Mercosur countries. But it also leaves Brasília more isolated in pushing for concessions.
The EU is also far from being the only partner eyeing South America, the target of an intensifying contest for influence between the West and China. Uruguay, especially, has argued in favor of a free deal with Beijing over one with the EU. Most of the region’s exports go to China, which has planned to invest $250 billion in the region by 2025.
While the growing interest of other partners could test the patience of Mercosur’s negotiators, it may also compel the EU to show more flexibility.
“All trade agreements are de facto dead until they happen,” said Lee-Makiyama.
“Trade negotiations never die: they just go into a stock-taking exercise. If the stars aren’t aligned, that doesn’t mean you kill the agreement: You just wait until the next political cycle, when things look slightly different.”
Additional reporting by Camille Gijs, Giorgio Leali and Douglas Busvine.