The EU-Mercosur trade agreement has emerged at a time of heightened tension in European politics.Amidst his political challenges this week, President Emmanuel Macron publicly declared that the deal, in its current form, is “unacceptable”.
The new European Commission is starting with a bang, as street protests by farmers and environmental organizations are anticipated on Monday, reflecting the deep divisions among member states and within sectors of individual states (Italy’s agriculture minister opposes the deal, whereas its foreign minister supports it).
The European Commission views this as an opportunity to defend and strengthen the global rules-based trading order just before a new Trump administration threatens to disrupt it.
Officials emphasize that while EU farmers may face challenges, they can also gain from the deal.
The agreement will significantly reduce tariffs between 10%-35% on EU cheese and other dairy products, wine, spirits, and chocolate; in return, Mercosur countries will eliminate duties on over 90% of EU imports, including a 35% tax on cars, and tariffs on parts, machinery, chemicals, and pharmaceuticals.
Delegates attend the Mercosur Summit in Montevideo, Uruguay.
The EU will phase out duties on all Mercosur industrial goods over a decade.
Bilateral agreements are in place to lower taxes for Brazilian companies exporting essential raw materials to Europe, which the EU currently sources from Russia and China.
According to officials, commodities such as nickel, copper, aluminum, steel, and titanium are critical for the Green transition.
This trade agreement has been in the works for 25 years.
Negotiations began in 1999 but stalled until they were revived under the Juncker Commission in 2016.
In 2019, both parties reached a preliminary agreement, yet fierce resistance from member states, the European Parliament, farmers, and environmental groups prevented its ratification.
The return of Brazil’s Lula Da Silva in 2022 reignited talks, with officials from both sides engaged in negotiations for the past eight months.
This time, the European Commission asserts that this trade agreement has evolved, now incorporating a new sustainability protocol focused on environmental and agricultural protections.
This agreement includes a mutual commitment to adhere to the Paris Climate Accord of 2015, a feature only present in the EU’s trade agreements with the UK and New Zealand thus far.
French President Emmanuel Macron remarked that the deal, in its present form, is ‘unacceptable’.
Officials indicate that the agreement features, for the first time, a legally binding commitment to preventing deforestation by 2030.
Previously, there were only political statements regarding this issue.
The EU’s deforestation regulation, which will prohibit commodities sourced from deforested lands, is set to come into effect next year, albeit after a year’s delay.
European environmental organizations have quickly dismissed the proposed changes.
The IFA claims that the deal would allow market access for 99,000 tonnes of beef and 180,000 tonnes of poultry at a zero-tariff rate, potentially “decimating” both the Irish and EU beef and poultry sectors, displacing around 18% of current EU production, particularly high-value cuts like steak.
“Ireland would be the most affected by this displacement as we are the largest beef exporters in the EU,” states an IFA information note.
“For context, the proposed 99,000 tonnes of additional beef from Mercosur countries represents about 22% of Ireland’s total annual beef exports.”
Irish farmers protesting the deal outside the Dáil last month.
A senior EU official stated that beef imports are not completely tariff-free.
“These 99,000 tons will not have zero tariffs,” said the official.
“There will be a reduced tariff rate of 7.5%. Moreover, this quota is split between fresh and frozen meat, with frozen meat making up 45,000 tons, which holds less market value.”
The European Commission points out that the 99,000 tonnes of beef comprise merely 1.6% of total European beef consumption, while poultry imports would account for 1.4% of consumption.
Additionally, the Mercosur deal imposes limits on the import of sensitive products, such as beef, poultry, sugar, and ethanol, enabling the EU to implement safeguard measures should any sectors be severely affected.
“These (tariff) concessions will be gradually phased in over seven years,” said another EU official.
In response to long-standing allegations from farmers and food safety advocates regarding the use of hormones and other additives in Brazilian beef, the EU has sharpened its standards in recent years, and checks on additives for imports from outside the EU are conducted by member states themselves.
“Much of this will depend on enforcement and actual controls, where we will remain vigilant to ensure that there are no compromises on our standards,” stated an EU official.
The Mercosur trade deal has faced pushback from Europe’s agricultural sector.
“That is within our control and something we will strive to address cooperatively with the Mercosur nations.”
The IFA points out that the Commission’s most recent audit concerning hormone residue found that controls ensuring Brazilian female cattle meat meant for the EU market was free from a particular hormone were “ineffective,” and Brazil’s food safety authorities could not assure the “reliability of operators’ sworn statements” on this issue.
A European Commission spokesperson affirmed that there is a prohibition on hormone-treated beef entering the EU, and it is incumbent on third countries to adhere to this ban.
“During an audit by the Commission in 2024, it was evident that Brazil’s control system is not as robust as we desired. Consequently, the Commission provided recommendations for improvement.”
“It is Brazil’s responsibility to rectify the situation and take the necessary measures to implement the Commission’s suggestions,” the spokesperson added.
Would the EU-Mercosur deal benefit other sectors of the Irish economy?
Ireland currently exports €555.7 million in goods and services to Mercosur countries – Brazil, Argentina, Paraguay, Uruguay, and Bolivia – while importing €596.7 million in goods.
An impact assessment of the 2019 agreement commissioned by the Department of Enterprise Trade and Employment (DETE) revealed that Irish exporters have established a presence in the Mercosur market since 2010. However, geographical distance and the low purchasing power in Latin America have hindered Irish exporters from being competitive.
A trade deal would aid in expanding that foothold “over time,” according to the report, projecting a 17% increase in exports, especially in chemicals, pharmaceuticals, electronics and optical products, electrical equipment and machinery, and processed foods and beverages like whiskey.
The report concluded that a Mercosur deal would present “promising opportunities for Irish companies to diversify and enhance the resilience of their market base in the long term.”
The agreement reached was signed in principle.
If Italy can be swayed to their side, the deal could face serious challenges.
The European Commission now has the daunting task of securing approval from member states and the European Parliament.
The initial step will be the legal “scrubbing” of the agreement, followed by its translation into 23 EU languages.
It is anticipated that the Commission will expedite the core trade deal, necessitating a qualified majority of member states, i.e., 15 countries representing at least 65% of the EU population, alongside the backing of the European Parliament.
Blocking the deal would require at least four member states representing over 35% of the EU population.
The French government and National Assembly, as well as a significant portion of civil society and the agricultural sector, are against the deal, and Poland and Austria have also expressed opposition, while the Netherlands and Italy have voiced reservations.
European Commission President Ursula von der Leyen hailed the Mercosur trade deal as a ‘win-win agreement’.
Germany, Spain, and other automotive powerhouses are eager for the deal to proceed, given declining sales to China and the looming threat of tariffs following Mr. Trump’s return to the White House in January.
They joined Portugal, Sweden, Denmark, Finland, Croatia, Estonia, Latvia, Luxembourg, and the Czech Republic in pressing the European Commission in September to successfully conclude negotiations.
“Finalizing this deal will enhance the global competitiveness of European automobile manufacturers by eliminating high tariffs and addressing technical trade barriers in their exports to the Mercosur market,” stated Sigrid de Vries of the European Automobile Manufacturers’ Association (ACEA).
“This development is timely for the automotive industry, which is facing significant challenges in the transition towards decarbonization.”
France will now mobilize resistance, alongside Austria, Poland, and the Netherlands, bringing the total to 30%.
If Italy joins their ranks, the deal could be in jeopardy.
It promises to be a tumultuous 12 months ahead.
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Both Emmanuel Macron and Olaf Scholz, the German Chancellor, have compelling political reasons to advocate for their respective positions.
However, they find themselves on opposing sides of the issue.
The experience of TTIP, the ill-fated EU-US trade agreement, serves as a reminder that once interest groups are thoroughly convinced that a deal poses a direct threat to their livelihoods, persuasion becomes exceedingly difficult.
Senior EU negotiators have made it clear that after 25 years, the deal has been finalized and cannot be renegotiated.
The significant difference now compared to TTIP is that Donald Trump is poised to disrupt global trade flows through aggressive tariffs and an America First agenda.
The European Commission believes that a comprehensive trade agreement between democracies, regardless of their flaws, with profound cultural connections, will sustain the principle of free trade.
The Mercosur countries also believe that the deal will help mitigate China’s influence.
Yet, the domestic backlash, including the potential for widespread and violent protests from farming groups, remains a variable yet to be quantified.
