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ECONOMY | 05-12-2023 09:01

Crunch time for EU-Mercosur trade deal at Rio summit

Fate of long-awaited trade deal hangs in the balance this week at key Mercosur summit in Brazil; Meeting was originally supposed to seal agreement, but last-minute bickering puts it in doubt.

The fate of a long-awaited but controversial Europe-Mercosur trade deal hangs in the balance this week when Brazilian President Luiz Inácio Lula da Silva hosts a summit of the South American regional bloc.

The presidents of the Mercosur countries – Brazil, Argentina, Paraguay and Uruguay – will gather Thursday in Rio de Janeiro, with the clock ticking down on promises from both sides to finalise a trade deal between the bloc and the European Union by the end of the year.

The meeting was originally supposed to seal a final version of the deal, which has been more than two decades in the making and would create the world's biggest free-trade zone.

But last-minute bickering has erupted in recent days, with public criticism of the proposed deal from France and Argentina.

French President Emmanuel Macron, who met Lula on Saturday on the sidelines of the COP28 UN climate talks in Dubai, voiced his opposition to the deal, sharply criticising supposed environmental shortfalls.

Agricultural powerhouse Brazil, the world's top exporter of beef and soy, notably faces accusations of tearing down the Amazon rainforest to make way for farming.

That chilled ties with Europe under far-right ex-president Jair Bolsonaro (2019-2022), who presided over a surge in deforestation.

It is an image Lula is fighting. Since he took office for a third term in January, his government has halved deforestation in the Brazilian Amazon from last year.

But Macron said the EU-Mercosur deal is "completely contradictory" with the anti-deforestation drive.

"It's a patchwork deal [that]... doesn't take biodiversity or the climate into account," he said.

Outgoing Argentine President Alberto Fernandez meanwhile said "current conditions" were not right to approve the deal as it stands.

Fernandez is due to hand power on December 10 to self-described "anarcho-capitalist" Javier Milei, who criticised the accord during his presidential campaign and threatened to pull out of Mercosur.

 

Close, but...

A Brazilian Foreign Ministry source told AFP the Argentine presidential transition means Mercosur will likely be reluctant to make any big decisions on the accord at the Rio meeting.

"But the new Argentine government has indicated its keen interest in closing" the deal, the official added, denying reports the South American bloc was pulling out of the negotiations.

Lula accused France of "protectionism" after Macron's criticism.

"Let's be clear on one thing," he said. "Don't say this is Brazil's fault, don't say it's South America's fault... If we don't reach a deal, it will be clear whose fault it is."

But he backed off talk of a possible breakdown in negotiations after meeting Monday with Chancellor Olaf Scholz in Germany, which firmly backs the deal, seen as key for its industrial sector.

"I'm not giving up," Lula said.

The contours of the deal were agreed in 2019, but a final version still needs to be ratified.

Tension has erupted on several issues, most recently a series of environmental protection demands issued by the EU.

Mercosur, which is the world's fifth biggest economy as a bloc but has struggled in recent years to coordinate policy, rejected the EU's "green protectionism."

It fired back with demands of its own, such as an environmental fund for developing countries.

 

'Deal dead'?

Both sides say negotiators have made big advances in recent weeks.

But time may be running out.

Paraguayan President Santiago Peña, whose country takes over the rotating Mercosur presidency from Brazil in January, has said he will seek trade talks with other regions if there is no EU deal by then.

"The deal is dead, but nobody has the courage to say it," Bruno Binetti, an international relations specialist at the London School of Economics, told AFP.

Seeking to show progress in other areas, Mercosur is due to sign another trade deal in Rio – with Singapore.

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by Ramon Sahmkow, AFP

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