EU-Mercosur deal faces moment of truth

(Most) leaders on both sides of the Atlantic are cooing over the once-controversial trade agreement.

The stars are moving into alignment for the European Union to finally ink its trade pact with the Latin American Mercosur countries.

But that will be easier said than done. The final stretch of talks — over protecting the Amazon and giving some concessions to South American companies — might be the toughest. And the clock is ticking: The window to sign the deal will soon close, with Argentina heading to the polls in October and the EU holding its own parliamentary election next year.

"A window of opportunity has opened," argues European lawmaker and longtime EU-Mercosur proponent Jordi Cañas. "It’s small, but we need to put our foot in the door opening and push hard to reach the objective," he told POLITICO.

A flurry of European leaders has visited Brazil in recent days, marking the return to friendlier relations with the Latin American powerhouse under newly reelected President Luiz Inácio Lula da Silva after the tumultuous years under far-right firebrand Jair Bolsonaro.

Negotiations started back in 2000 and were completed in 2019: The deal would slash duties; give Mercosur's agricultural producers better access to the EU; and offer export opportunities to EU manufacturers. But the EU has since put off signing, largely due to concerns over deforestation in the Amazon and French worries that its farmers could suffer from a glut of Latin American produce.

Now, the geopolitics of an EU-Latin American rapprochement are more favorable than they’ve been for years. The COVID-19 pandemic and Russia’s invasion of Ukraine brought greater public awareness to the need to diversify sourcing to mitigate supply-chain disruptions and geopolitical risks.

Wrapping up the trade deal is now on almost everyone’s lips.

German Chancellor Olaf Scholz’s recent visit to Brazil put the accord back in the limelight — the German leader said that both Berlin and Brasilia want “very rapid progress” toward concluding the agreement, whereas Lula said he wanted it signed “by the end of the current semester.”

Argentina’s Foreign Minister Santiago Andrés Cafiero is visiting Brussels, and his trip bears a similar message of hope that now’s the moment.

"We agree we will work very intensively," EU trade chief Valdis Dombrovskis told POLITICO after meeting with Cafiero. The EU-Latin American summit in July, he added, would be a "very good opportunity to either finalize or make very good progress on this."

Climate changes

Both sides have managed to somewhat assuage climate campaigners’ opposition to the deal, now that Lula has nominated respected Amazon activist Marina Silva to the post of environment minister and Brussels has created its own rules to ban imports that contribute to deforestation.

Even EU climate chief Frans Timmermans is pushing for a swift conclusion of the deal. If the two sides can agree on halting deforestation, Brazil “deserves” the pact and hopes it can be signed by July, Timmermans recently said after a trip to Brazil.

EU politics also appear to be shifting in favor of the deal: France’s loud voice against trade pacts like the one with Mercosur might be quieting down, now that the French presidency of the Council of the EU is over and President Emmanuel Macron has safely won reelection.

The free trade-loving Swedes are now in the Council presidency seat and want to advance the deal. And Spain will be taking over the helm in Brussels from July until the end of this year.

“We believe now there might be a window of opportunity,” Swedish Trade Minister Johan Forssell recently told European lawmakers, speaking about the Mercosur deal.

Madrid couldn’t agree more. “Spain has always been leading the call for an EU-Mercosur agreement, and it seems positive to us that other member states are joining this position,” a Spanish diplomat said, adding that this year holds “favorable circumstances.”

The EU is Mercosur's second-largest trading partner in goods after China. European goods exports to Mercosur were worth €45 billion in 2021, while Mercosur's goods exports to the EU tallied up to €43 billion. A deal would benefit Mercosur's meat and processed foods exporters in exchange for better access for EU companies in the automotive, pharma, chemical and textile sectors.

Tricky final touches

But now it’s down to the politically delicate last stage, which could jinx the agreement altogether if there are any trip-ups.

The EU wants to include a legally-binding addition to the text over how to interpret the deal’s climate conditions, which could drag out negotiations and might not be sufficient for the environmentalist camp.

“Don't rush headlong into the EU-Mercosur trade agreement!” warned Anna Cavazzini, a European lawmaker with the Greens. “There can only be a conclusion if … the agreement is renegotiated in central areas such as sustainability and forest protection.”

The European Commission wants the trade deal fast-tracked through European ratification and EU capitals don’t seem ready to integrate sanctions into the green chapter, which could anger activists and the general public.