17 years after the first negotiations began, the European Union and Mercosur (a South American free trade pact between Argentina, Brazil, Paraguay and Uruguay) are inching ever closer to agreement on a far-reaching free trade deal.
However, negotiators have found themselves confronted by further obstacles, as scrutiny from lobby groups, NGOs and media outlets in the EU – which cater to an audience highly sceptical of Brussels’ backroom FTAs – threatens to derail the process.
If signed, the deal would include over 800 million inhabitants and significantly boost trade between the two regions, which in 2016 already accounted for 85 billion euros.
While technical issues are still being resolved behind closed doors, political headwinds are anything but fading. Several stakeholders in the EU ramp up their efforts to raise awareness on critical topics such as food hygiene and environmental threats.
A long time in the making
Negotiations between the EU and the four Mercosur members date back to 2000. Early talks faltered, but were picked up again in 2010.
Since then, several breakthroughs have been announced, but no deal has yet been reached as a result of protectionist reflexes on both sides of the Atlantic, and fundamental disagreements over key issues such as industry and agriculture.
However, the recent commotion over the impending conclusion of talks seems more warranted than ever, with many important political variables in favour of an agreement.
On the one hand, all four Mercosur countries are now led by pro-market governments who champion trade liberalisation, as statements by their foreign ministers made clear during an EU-Mercosur summit held in Brasilia last month.
On the other hand, the EU has recently concluded comprehensive trade negotiations with Canada and Japan in an effort to counter a global comeback of protectionism. In addition to positioning the EU as a champion of global free trade vis-à-vis the Trump administration, EU Commissioner for Trade Cecilia Malmström has embarked on an ambitious agenda to outmanoeuvre China’s trade expansion.
The strategy seems to be working in the case of the Southern Cone countries: Mercosur’s member states have contradictory positions regarding trade with China, which gives extra weight to the negotiations with the EU.
According to Bloomberg, an Argentine government official believed it to be “between possible and probable” that the free trade agreement will be signed by the end of 2017. EU negotiators were equally optimistic, and are hoping to close a deal this month.
However, the end-game of negotiations brings new stakeholders to the table, causing fresh trouble for Malmström and her team.
Beef with the agricultural lobby
For the Mercosur states, the biggest gains from a deal would be in agricultural exports. However, this is also where the European Commission is facing the strongest opposition.
Accordingly, the powerful agricultural lobby is exerting pressure on governments in farming nations such as France, Poland, and Ireland, which saw French President Emmanuel Macron lead an alliance of 11 EU member states in calling for caution rather than rushing into a deal with the Mercosur bloc.
The Commission successfully dodged Macron’s initiative, however, and opposition to the trade deal remains vocal. Environmentalists fear that the surge in demand for cheap beef and soy could drive deforestation and have ruinous consequences for the Amazon rainforest and other fragile ecosystems, such as the Gran Chaco region between Argentina, Bolivia and Paraguay.
Concerns over food hygiene and environmental impact
Due to limited access to the negotiation documents, it is unclear how the EU’s precautionary principle, which aims to ensure environmental and consumer protection through preventative decision-making, would be affected by a deal.
Greenpeace leaked critical EU-Mercosur negotiation documents last week, highlighting the marginal role that the precautionary principle has in the draft documents. The organisation is especially concerned about the environmental damage that large-scale cattle ranching and soy farming is causing in South America.
The leak is further fuelling the political fallout from a Brazilian food safety scandal, the ‘Carne Fraca‘ investigation, which brought to light bribes accepted by dozens of federal inspectors to allow expired meat products to be sold.
Inspectors also falsified sanitary permits, raising doubts as to whether the EU should rely on Mercosur’s food safety standards, as was proposed during the negotiations.
On top of that, Brazilian president Michel Temer is in the midst of an enormous corruption scandal which also has links to the agricultural sector.
Other areas of potential conflict include differing regulatory stances on GMO products, which Mercosur is treating more generously than the EU. Public opinion in the EU on such issues has proven to be highly contentious, which is why negotiators have tried to keep a low profile during the negotiations.
Why a deal is more likely than no deal
Ironically, these revelations might accelerate negotiations. In light of the enormous public mobilisation against earlier EU trade agreements such as the Transatlantic Trade and Investment Partnership (TTIP), the Commission has an interest in wrapping up a deal before opposition can effectively organise.
It can count on the support of the mighty automotive lobby as well as various other industries, who all hope to gain from easier access to the Mercosur market.
Additionally, there is a geopolitical urgency in concluding a deal. Having gained momentum by reaching trade deals with Canada and Japan this year, the Commission now seems on track to sign further agreements with Mexico, New Zealand and Australia. Problems with finalising the Mercosur talks could weaken the EU’s position vis-à-vis other trading partners, hence there is an impetus for making some concessions if they allow for a conclusion of the deal.
EU-Mercosur: Uruguayan president, Vázquez: "there is a firm political decision by the Mercosur countries to move forward with a free trade agreement" that, "if it is not closed now, it will be closed in ten days or two months". https://t.co/DJkqZYtRGy
— Frans Köster (@franskoster070) December 11, 2017
As the junior partner in those negotiations, the Mercosur states are likely to accept any deal that is not detrimental to their development agendas. Economic growth can be decisive in elections, which are coming up next year in Brazil and Paraguay.
Furthermore, the deal would serve as a benchmark for future free trade agreements, which Mercosur is currently negotiating with Canada, South Korea, and Japan.
In the end, reaching an agreement with the EU would also help overcome the political crisis in which Mercosur is trapped since suspending crisis-hit Venezuela. As Juan Cruz Díaz, managing director of the Cefeidas Group, a regulatory risk advisory company based in Buenos Aires, told Bloomberg: “An agreement will be a strong political signal that will reinvigorate Mercosur.”
Still going strong
After all, negotiations might not be concluded in December of this year. Nevertheless, there is reason to expect an agreement either during a Mercosur meeting on Dec 21-22, or in early 2018.
Such an agreement will still need to be passed by the EU member states, a process which proved derailing for the TTIP, and which almost resulted in the failure of the CETA deal with Canada.
Pushing the agreement through national parliaments will be a slow, arduous task; but as it has already been 17 years in the making, negotiators have proved their commitment and endurance time and again.