Why Europe’s trade deal with South America is so contentious | Wilnesh News

The EU’s blockbuster trade deal with South America’s Mercosur bloc is widely seen as highly controversial, with EU members divided over its terms and many countries wary of yet another farmer flashpoint.

After 25 years of negotiations, the EU and five South American countries – Brazil, Argentina, Uruguay, Paraguay and the newly formed Bolivia – have signed a landmark The trade agreement, signed on December 6, lays the foundation for one of the largest free trade zones in the world.

transatlantic partnership is estimated Covering an area of ​​more than 700 million people, it accounts for approximately 20% of global gross domestic product.

The deal, which aims to boost trade between the two blocs by reducing tariffs on a range of products, currently requires approval by the EU parliament and a qualified majority of the 15 member states.

Analysts expect the approval process to be bumpy, with farmers and some EU member states warning it could create unfair competition for European agriculture.

France is the second largest economy in the Eurozone Strongly opposedPoland, Italy, Austria, the Netherlands and other countries have expressed reservations.

Germany, which strongly supports a deal, is part of a group of 10 other member states that has called on European Commission President Ursula von der Leyen to quickly approve the final terms.

“I think we first need to be cautious about the fact that we’ve been here before,” Mariano Machado, chief Americas analyst at Verisk Maplecroft, told CNBC via video call.

EU and MERCOSUR bloc originally Sign draft trade agreement In June 2019, progress was delayed until earlier this month due to a series of political and environmental issues. Some of these headwinds include expected increases in pesticide use and the prospect of further loss of biodiversity, concerns about the rate of deforestation in the Amazon, and concerns about the human rights of indigenous groups.

Machado said France’s tacit rejection of the deal for nearly six years had evolved into “an active attempt to put the deal behind us.”

In this regard, Machado said the EU’s von der Leyen had achieved a huge victory by “squeezing the cracks” in France’s political turmoil and making it “increasingly difficult” for Paris to oppose the deal.

“It is much more expensive to overturn a piece of paper than it is to overturn an idea,” Machado said, adding that France seemed unlikely to successfully lead the minority opposition.

A French foreign ministry spokesman did not respond to a request for comment.

“Capitals opposed to the agreement are trying to build a coalition to prevent the council from reaching the required qualified majority,” explain Alberto Rizzi is a policy fellow at the European Council on Foreign Relations, a think tank.

“Stopping it would inflict huge economic and political damage that the EU can barely afford,” he continued. “European governments cannot afford to face a test of their unity and strength in placating opponents such as Europe’s farmers and potential far-right voters. ”

Analysts at Dutch bank ING said food and agricultural products accounted for the largest portion of EU imports from Brazil, Argentina and other Mercosur countries estimate By 2023, total imports of these goods will reach 23 billion euros ($24.13 billion).

The deal is expected to boost trade between the two regions, citing expanded import quotas and lower or elimination of tariffs on products such as beef, poultry, sugar beets and soybeans, ING analysts said in a research note earlier this month. tariff.

This sows the seeds of dissatisfaction among EU farmers, especially since Mercosur farmers can operate at lower costs.

For example, when farmers in southwestern France demonstrated on the Oche-Toulouse road on December 12, they built a wall with 578 bales of hay, each said to represent a member of the country’s 577-seat parliament. French MPs, plus a bale of hay representing French MPs.

The obstruction was in protest against the EU-Mercosur trade deal and other domestic issues.

Environmentalists have also warned of the potential for increased trade in agricultural products, arguing that EU food imports could rise significantly in exchange for increased EU exports of cars, plastics and pesticides.

Laura Restrepo Alameda of the Latin American Climate Action Network said: “No green add-on will fix what is an inherently bad deal.” explain December 6th.

She added: “It was established to facilitate trade in products that contribute to deforestation, land grabbing, heavy pesticide use, carbon emissions and human rights abuses.”

In response to CNBC’s request for comment, European Commission spokesman Olof Geer said the EU’s approach to the deal “exemplifies how trade deals can effectively advance global climate efforts and link economic cooperation with environmental responsibility.”

Gill pointed to the inclusion of the latest trade and sustainable development standards and the inclusion of the landmark Paris Agreement as “fundamental elements” of the agreement.

“This would enable the EU to suspend the Paris Agreement if its standards are not adhered to, thereby strengthening the role of trade agreements in supporting climate goals,” Gill told CNBC via email.

Analysts told CNBC earlier this month that lithium’s strategic importance May played a major role in the trade deal, while lower car tariffs are also seen as a much-needed boost for Europe’s struggling auto industry.

Lithium is sometimes called “white gold” due to its light color and high market value. regarded as As a key component in the global transition away from fossil fuels.

Mercosur countries such as Argentina, Bolivia and Brazil have large lithium reserves, and EU demand for the key raw material is expected to increase significantly.

Elizabeth Johnson, head of Brazil research at economic consultancy TS Lombard, said Brazil is likely to be one of the biggest winners from the deal.

Johnson said in a research report released on December 11 that “the country already accounts for about 80% of Mercosur’s total exports to the EU, and the EU is currently Brazil’s second largest trading partner.”

“Brazilian politicians hope that the agreement will help expand Brazil’s export base, including new products, and strengthen European investment in Brazil, especially in the energy transition,” she added.