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MONTEVIDEO (dpa-AFX) – Despite ongoing concerns from countries such as France, Italy and Poland, the EU Commission has concluded negotiations on a huge free trade zone with the South American alliance Mercosur. Commission President Ursula von der Leyen announced this after a final round of talks with top representatives of the Mercosur states Brazil, Argentina, Uruguay and Paraguay. The negotiations took place over a period of almost a quarter of a century.
“This agreement is a win for Europe,” said von der Leyen in Uruguay’s capital Montevideo. It will work for people and companies and create more jobs, more choice and prosperity. “Companies benefit from lower tariffs and simplified procedures,” said von der Leyen.
Representatives of the Mercosur economic alliance also emphasized the opportunities that the agreement offers for expanding trade relations. “It’s not a magical solution, but it’s an opportunity,” said Uruguay President Luis Lacalle Pou.
Federal government relies on majority vote on trade part
Most recently, the federal government in particular put pressure on the negotiations to finally be finalized and the text for the agreement presented to the EU states for a vote. “After more than 20 years of negotiations, the political agreement between the Mercosur states and the EU has arrived – an important hurdle for the agreement has been overcome,” wrote Chancellor Olaf Scholz (SPD) on X. “This can be done for more than 700 million people a free market will emerge, more growth and competitiveness.”
Germany is relying on the fact that the trade policy part could be decided by majority vote in the Council of Member States. Member states would then only have the right to veto the planned agreements on political dialogue and cooperation. However, splitting the contract in this way could pose legal risks.
The agreement between the EU and Mercosur states would create one of the world’s largest free trade zones with more than 700 million inhabitants. Above all, it envisages reducing tariffs and thus boosting trade.
Car manufacturers see enormous potential
The Federation of German Industries (BDI) welcomed the agreement as very good news for companies. The agreement could provide an “urgently needed growth stimulus for the German and European economies”. The German Chamber of Commerce and Industry spoke of a “milestone for EU trade policy”.
The German automotive industry in particular sees clear potential to increase exports to South America. Particularly due to high tariffs, only 20,700 cars were exported from Germany to Argentina and Brazil in the entire year of 2023.
Trade politicians also see the planned agreement as a message to the future US President Donald Trump and as an important step in competition with China. The aim is to show Trump that functioning free trade agreements are better for the domestic economy in the long term than sealing off markets with new tariffs and other trade barriers.
With regard to China, it is certain that if the agreement fails, the Mercosur states would turn even more economically to the People’s Republic.
There was already an agreement in principle in 2019
A fundamental political agreement on the establishment of the free trade zone between the EU and Mercosur had actually already been reached in the summer of 2019. However, the deal was then questioned again by several EU states such as France, Poland and Austria, and there were years of renegotiations.
Critics fear that European farmers will be forced into a merciless price war in the future. “We farmers were not heard. This agreement is one-sided to the detriment of European farmers and massively weakens our businesses in terms of competition,” said the President of the German Farmers’ Association, Joachim Rukwied.
Environmentalists are concerned that the agreement will fuel rainforest destruction in South America. “This agreement creates few winners, but many losers. The beneficiaries include chemical, agricultural and oil companies that make enormous profits through tariff reductions on their climate and environmentally damaging products,” said Harald Gross from the environmental protection organization Greenpeace. “However, the losing side is much larger: the climate – and therefore all of us – is at stake.”
The EU Commission and the Federal Government, however, reject the allegations as unjustified and emphasize that the overall economic benefits clearly outweigh the negatives. It is emphasized that only products that comply with the extensive European regulations are allowed to be imported into the EU. At the same time, it is estimated that companies in the EU could save several billion euros in tariffs every year.
Last year, goods worth around 56 billion euros were exported from the EU to these four Mercosur countries; in the opposite direction, the export volume was around 54 billion euros. According to EU figures, a total of 60,500 European companies could benefit from the planned free trade agreements.
Veto possibility could be bypassed
After the negotiations have been concluded, the texts for the agreement still have to be legally examined and translated into the languages of the contracting states. The EU Commission then has to make a decision as to whether it will be submitted to the member states for a vote as a whole or split into two parts. The European Parliament would definitely have to agree. A decision is not expected until the second half of next year at the earliest.
Macron considers the deal unacceptable – support from the Bundestag
It is considered unlikely that the agreement can be implemented even if it has to be submitted to national parliaments for approval, especially because of the farmers’ protests in France. French President Emmanuel Macron announced on Thursday that the agreement was unacceptable in its current form. Italy’s Prime Minister Giorgia Meloni announced that the conditions for the agreement were not currently met.
In Germany, however, there is broad support. Politicians from the SPD, CDU/CSU and FDP recently signaled their approval in the Bundestag. Government politicians such as Chancellor Olaf Scholz (SPD) as well as Economics Minister Robert Habeck and Foreign Minister Annalena Baerbock (both Greens) are also in favor of concluding the agreement./aha/DP/ngu