After an initial provisional agreement in June 2019 (see EUROPE 12285/5), it took five more years and a change of president in Brazil for the negotiations on the EU-Mercosur trade agreement to come to a successful conclusion. On Friday 6 December in Montevideo (Uruguay), the President of the European Commission, Ursula von der Leyen, announced the conclusion of negotiations between the two blocs, alongside the Presidents of Uruguay, Argentina, Brazil and Paraguay.
This announcement is the result of intense negotiations between the two blocs over recent months, and concessions made on both sides. The Brazilian President, Inácio Lula da Silva, has finally accepted that non-compliance with the Paris Agreement by one of the parties could lead to the partial or complete suspension of the Free Trade Agreement (FTA). This is a victory for the EU, which wants to introduce this clause in all its future trade agreements.
In exchange, Brazil got the EU to review the conditions for exporting its cars. The EU also had to agree to the inclusion in the agreement of a “balancing mechanism” in the event of new European rules affecting trade.
Indeed, if one of the partners adopts new measures that alter the benefits of the FTA, the other party could refer the matter to an arbitration tribunal (within the agreement) and, if the tribunal gives a favourable opinion, impose rebalancing measures.
According to a senior European official, the European rules already adopted, such as the Carbon Border Adjustment Mechanism (CBAM) or the imported deforestation regulation, are not affected. The mechanism only covers future measures that are not planned at this stage. The same source believes that the use of this mechanism is unlikely, and that it serves mainly to reassure Mercosur’s partners.
Concessions have also been made on access for the EU to raw materials from Brazil, not all of which will be subject to total liberalisation.
European vehicle exports
Exports of European electric and hybrid vehicles will see their tariffs abolished over a period of 18 years instead of 15.
To further reassure Mercosur in this segment, the EU has also agreed to introduce a safeguard clause that can be activated more easily in the event of too large an influx of European vehicles of any kind. If Mercosur demonstrates that imports of European cars are causing injury (rather than “serious injury”) to the local market, it will be able to freeze the timetable for gradual liberalisation.
Imports of agricultural products
Ursula von der Leyen addressed European farmers directly from Montevideo: “We have heard you, listened to your concerns (...) The agreement contains robust safeguards to protect your livelihoods”.
However, the tariffs and quotas on agricultural products from Mercosur have not been changed compared to the agreement reached in 2019, despite being criticised by representatives of the sector in Europe.
According to one European official, there are sufficient guarantees that the EU market will not be disrupted.
The European Commissioner for Agriculture, Christophe Hansen, had not reacted to the agreement at the time of writing. In his previous role as an MEP, he often came out in support of the FTA.
Mixed reception
The EU’s agricultural organisations and cooperatives (Copa-Cogeca) have stated that their sector would be “particularly vulnerable” under the terms of the agreement.
Representatives of dairy, wine and spirits producers welcomed the conclusion of the negotiations, as the treaty will benefit their exports.
Most EPP MEPs also expressed their satisfaction at this long-awaited announcement, described as “historic” by Jörgen Warborn (EPP, Swedish).
Unsurprisingly, the group’s French delegation took the opposite view. Ms von der Leyen’s decision is a “betrayal”, according to Céline Imart (EPP, French), who recalls the rejection of several Member States and farmers.
On the left, the Greens/EFA and The Left groups unanimously denounced the conclusion, while the Socialists and Democrats and the members of Renew Europe split into two camps.
For their part, environmental organisations are unanimous: the agreement is “toxic”, according to Greenpeace and Friends of the Earth Europe.
Next steps
The text of the agreement must now be translated and legally verified before being presented to the Council for signature and to the European Parliament for ratification. This will take several months, giving the Commission time to convince reluctant Member States and MEPs.
The changes made to the agreement since it was announced in 2019 should be convincing, according to a senior European official. (Original version in French by Léa Marchal)