Since Russia's onslaught, Europe has become increasingly reliant on South America. The Mercosur pact might be revived, since competition never sleeps.
 |
| Mercosur Trade Agreement |
At the beginning of last year, many observers saw EU Mercosur as outmoded, a relic of a bygone era of outdated free trade accords, and a potential climate killer and rainforest destroyer. Only a few optimists seemed to believe in its eventual demise. As it stood, numerous European countries (including France) and parliaments (including the European Parliament) were hostile to the accord. The federal government likewise took a more distant approach under then-Chancellor Merkel. The traffic light government's coalition agreement currently supports ratification of the deal, but only if extra binding responsibilities for environmental, social, and human rights protection, as well as rainforest preservation, are approved.
However, the deal between the EU and Mercosur has resurfaced on the German and European political agendas. Chancellor Scholz came to Chile at the end of January, when discussions on modernizing the association and free trade agreement between Chile and the EU, which had been in place since 2002, were completed in December. Then it went off to Argentina and Brazil, Mercosur's two giants. The EU-Mercosur deal completes a chain of EU free trade and cooperation accords that currently includes practically all Latin American and Caribbean nations.
It appears that a "tipping point" in EU-Latin American ties has also occurred. The EU recalls that it desired a "strategic alliance" with Latin America during the first Euro-Latin American summit in 1999. The foreign ministers (or their representatives) of the EU and Latin America last met in Buenos Aires in October 2022 to prepare for a summit meeting of the heads of government of the EU and the Community of Latin American and Caribbean States (CELAC), which will now take place in Brussels on July 17 and 18. After all, the previous summit took place eight years ago.
After the meeting of foreign ministers in autumn, the EU foreign policy representative, Josep Borrell, called for 2023 to be the year of Latin America in Europe and the year of Europe in Latin America. In this respect, the EU-Mercosur agreement also has a symbolic meaning. This shows that the EU is present in Latin America and underlines its strategic interest in the region.
Without a question, the geopolitical importance of Latin America and the Caribbean to the EU has grown since Russia's invasion of Ukraine. The vote of Latin American states in the United Nations is significant politically. Latin America possesses raw commodities, particularly natural gas and oil, that were formerly provided to the EU by Russia. Other strategically essential raw resources, such as lithium (which the EU obtains 78% of from Chile), are already imported from Latin America. Bolivia and Argentina, in addition to Chile, contain significant lithium reserves. Furthermore, Latin America is one of the locations with the highest potential for producing and exporting green hydrogen at competitive production prices. This makes the region particularly interesting for Europe, one of the largest future markets for green hydrogen. But Europe must act now.
The EU competes with other Latin American actors. The United States seeks to reclaim lost territory, China wants to cement its position as the most significant trade partner for many nations, and other countries are becoming more interested in Latin America as a supplier of raw materials and a sales market. In mid-January, for example, the Japanese foreign minister visited Argentina, Brazil, Ecuador, and Mexico. China, on the other hand, wants a free trade pact with Uruguay as a prelude to a deal with Mercosur. However, in an astute political move, Brazil's President Lula da Silva tied future discussions with China on a Mercosur free trade pact to the signature and ratification of the accord with the EU.
This demonstrates that the EU is still a big factor in Latin America (especially in the Mercosur countries), both as a commercial partner (though China has surpassed it) and as an investor (via European companies). It has soft power as a successful model. Europe, on the other hand, cannot expect special treatment from Latin America. The majority of regional governments strive to differentiate and balance their foreign contacts as much as possible.
In a world where geoeconomic parameters are altering in its favor, the EU must learn to defend its geopolitical interests. The EU-Mercosur deal, as well as other accords with Latin America, must be portrayed to the European political public less as a free trade agreement and more as an agreement to maintain Europe's strategic autonomy, in order to remove partly legitimate and partly fabricated worries. Because, even without completing the deal with the EU, Brazilian beef exports are expected to hit a record high in 2022, owing primarily to Chinese demand. Moreover, despite the non-signing of the EU-Mercosur agreement, fires and deforestation in the Amazon have grown dramatically since 2019. The EU-Mercosur accord was a lucky break for Brazilian President Dilma Rousseff. His anti-environmental policies and the fires in the Amazon rainforest mobilized public opinion in Europe and allowed agricultural lobbyists to hide their protectionist goals behind environmental protection.
With Lula's election victory and his credible assertions of commitment to conserve the environment and the Amazon rainforest, as well as Marina Silva's selection as environment minister, opponents of the EU-Mercosur pact are under pressure. In fact, however, the Brazilian government's pronouncements of purpose have had to win in the face of opposition from a more conservative Congress with a powerful agricultural lobby.
The aim for the EU will be to persuade the French government (and a majority in the National Assembly) to reverse course. However, other European nations must reassess their stance as well. Instead of participating in geopolitics to increase Europe's strategic autonomy and establish strategic partnerships, important EU players have supported ethically cloaked protectionism for far too long.
From a European standpoint, two possibilities appear viable for bringing the EU-Mercosur agreement to a close: a joint declaration by both parties clarifying certain of the trade and sustainable development chapter promises. Or, in contrast to the first option, a binding supplemental protocol that would add new duties to those already outlined in the EU-Mercosur draft agreement stated. Mercosur nations may agree to both, but they will want a trade-off in terms of government procurement and protection for specific economic sectors. In view of the experiences with other agreements with Latin America (e.g. with Central America or members of the Andean Community), which have still not been fully ratified on the European side, parts of the Mercosur Agreement that fall solely within the competence of the EU should be temporarily in come into force as soon as the European Parliament has ratified the agreement.
The main problem today is to strike a balance between the interests of both parties without renegotiating the agreement's terms. Renegotiation would necessitate a fresh negotiating mandate for the EU Commission and would push the signature of the EU-Mercosur agreement, which has been in the works for over 20 years, further into the future. Josep Borrell concurs: while it may be argued in Tango literature that 20 years is nothing, in the case of the EU-Mercosur deal, 20 years is far too long. The agreement might be signed for the last time in 2023. Otherwise, the debate will soon shift from why it is still not signed to why it has become outdated.
The author Prof. Dr. Detlef Nolte is Associate Fellow of the German Society for Foreign Relations (DGAP) and the German Institute for Global and Area Studies (GIGA).