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Perspectives on the EU-Mercosur Agreement

(image credits: https://ec.europa.eu/trade/policy/in-focus/eu-mercosur-association-agreement/ )

Twenty years of negotiations have produced the largest free trade agreement between regional blocs, but the future of the EU-Mercosur association is still uncertain. Political differences and lack of trust threaten the success achieved in 2019, which would create a market equivalent to ¼ of world GDP, with 800 million people . If the economic importance of the agreement is evident from the annual cut of €4 billion in Mercosur tariffs to the EU and the elimination of 93% of EU tariffs to Mercosur, its political importance stands out as it constitutes a great triumph of multilateralism and free trade . Additionally, the agreement is guided by the holistic understanding of free trade by promoting sustainable development, labor rights, business conditions and economic openness.

For Portugal, the agreement with Mercosul has a “fundamental strategic, geopolitical and economic importance for the European Union” , reflecting this in the support of the initiative over time, regardless of governments from the country. Additionally, the agreement also enjoys the support from the Portuguese business sector for the benefits it will bring, particularly to the wine, industrial and textile sectors, revealing a 2017 study by the Universidade Católica Portuguesa that the agreement will have an immediate impact on Portugal’s GDP of at least 0.2% .

Despite its importance, there still appears to be a long way to go , both in formal aspects – the official document still needs to be finalized, revised and translated – and especially in political aspects, lacking ratification by European and Latin American governments and parliaments. This is where the biggest obstacle to the success of the initiative lies.

On the European side, the governments of France, Germany, the Netherlands and Austria They have already reiterated their unavailability to ratify the agreement in its present form, as they allegedly do not trust Brazil’s commitment to combating deforestation and climate change, with one member state not doing so enough for the agreement to fail. On the Mercosur side, positions are divided. In Brazil, the Bolsonaro government claims that the country suffers from unjustified criticism, but he does not fail to reinforce that he defends the agreement . On the other hand, in Argentina, Alberto Fernández’s government initially showed skepticism towards the benefits of free trade, particularly during the presidential campaign, having evolved into a position of economic pragmatism when agreeing to the agreement. Finally, Paraguay and Uruguay maintain the desire for a quick resolution of the impasse, mediating positions and warning of strategic danger of possible failure in a context of Chinese regional rise.

For the Portuguese-speaking world, this is not an opportunity to miss. Brazil occupies the 124th place in the annual Ease of Doing Business ranking of the World Bank and the 143rd in the economic freedom ranking from the Heritage Foundation. In this context, the Brazilian business sector would benefit from the simplification of procedures, greater access to the European market and incentives to improve competitiveness. For Portugal, the agreement would strengthen the country’s role as a European gateway to the Americas, reinforcing the already important place for Brazil as a supplier and customer of the country . Portugal should take advantage of the rotating presidency of the EU Council to unblock the impasse, possibly through a additional environmental agreement that gives new confidence to the commitments made. As the Portuguese Minister of Foreign Affairs, Augusto Santos Silva, mentioned during the X Meeting “Strategic Triangle: Latin America – Europe – Africa” of IPDAL, the Portuguese presidency does not seek to solve all problems, but rather to provide the conditions for the resolution of them is advanced. It is important, however, as stated by the Ministry of Foreign Affairs of Uruguay, to ensure that any commitment must be bidirectional and with reciprocal concessions .

Argentina, current holder of the rotating pro tempore presidency of Mercosur, stated that it is open to European proposals aimed at unblocking the resulting impasse, as long as they are applicable to both parties and do not alter the balance of the agreement. nor incorporate sanctions .

If, on the one hand, understanding the European position requires seeing the bloc not only as a political-economic union, but also as a community of values projected globally, understanding the Brazilian position requires understanding legitimate concerns of emerging economies, which see their economic potential limited by values that did not exist during the same phase of industrialization by today’s most advanced economies. The future thus seems to foresee increasing pressure under the agreement, especially with the great growth of environmentalist political forces in Europe , a worsening of the economic situation in Argentina and new presidential elections approaching in Brazil. In any case, this is a unique opportunity for the EU to strengthen its presence on the continent and consolidate the interdependence of the trade and climate agenda, but also for Mercosur, revitalizing the bloc and showing important signs of economic openness and environmental commitment.

2021 promises to be a decisive year for unlocking the agreement, and it is important not to let the chaos created by the Covid-19 pandemic sink the search for an understanding into diplomatic agendas.

Text: Nuno Vilão
Editing: Filipe Domingues


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