Mercosur-EU: European trade chief cancels trip to RJ – 12/03/2023 – Market

The European Union’s trade commissioner, Valdis Dombrovskis, canceled his trip to Brazil this week to finalize the terms of the bloc’s trade agreement with Mercosur, at the same time as the prospects of concluding negotiations for a consensus text this year decreased.

The leader was supposed to travel to Rio de Janeiro for a meeting of Mercosur nations, which include Brazil, Argentina, Uruguay and Paraguay, on Thursday (7). But the agreement became more distant with the change of government in Argentina and the declaration of opposition by the president of France, Emmanuel Macron.

This Saturday (2), the Frenchman stated that the agreement is “antiquated” and said he had concerns about the lack of environmental targets. “I am against the Mercosur agreement with the European Union. It is an agreement completely contradictory to what [Lula] is doing in Brazil and with what we are doing. It’s an agreement that was negotiated 20 years ago and that we tried to fix, and it was badly fixed,” he said.

“I cannot ask our farmers, our industrialists in France, but also across Europe, to make efforts to apply new rules to decarbonize… and then suddenly say: ‘I am removing all tariffs to allow the entry of products that do not apply these rules'”, he stated.

Macron’s comments frustrated EU officials who had hoped to be close to sealing a deal that has been under negotiation for two decades.

The change of government in Argentina also made the agreement difficult. President-elect Javier Milei, who takes office on December 10, has already criticized the Mercosur bloc and promised, during the campaign, that he would not accept negotiations with the European Union.

Two EU diplomats said the chances of a deal this year were diminishing, while one said negotiations for a deal could collapse by the summer of 2024 (between June and September).

Negotiators have faced a series of setbacks related to the EU’s desire to add more environmental commitments since an interim agreement in 2019.

This Sunday (3), the president of Brazil, Luiz Inácio Lula da Silva, stated that the country cannot be held responsible in the event of a failure in negotiations.

“If there is no agreement, be patient. It was not due to lack of will. The only thing that has to be clear is that they no longer say that it is on Brazil’s account and that they no longer say that it is on South America’s account”, he said Squid.

High-ranking members of the Brazilian government already take it for granted that negotiations with the European Union will end without an agreement, as Brazil will not give in to the new environmental constraints and it is unlikely that the Europeans will be able to articulate the positions of all the bloc’s countries in a week. .

“Take responsibility for the fact that rich countries do not want to make an agreement from the perspective of making any concessions. It is always about winning more. And we want to be treated with the respect of independent countries. Let’s see how it will happen on Friday [dia 8]. If there is no agreement, at least it will be clear who is to blame for not having an agreement”, said Lula.

The next few days, which coincide with the end of Brazil’s mandate as Mercosur’s rotating presidency, will be vital to finalizing the agreement, which would be the first between the Mercosur bloc and one of its trading partners. It would cover countries with a total population of 780 million people.

Paraguayan President Santiago Peña also warned that Mercosur could fold if the EU does not finalize the treaty by December 6.

Outstanding issues include competition in public tenders and concerns over EU deforestation legislation and environmental requirements.

Luisa Santos, deputy general director of business entity BusinessEurope, said the agreement is crucial for the bloc’s economic growth.

“Mercosur is even more important at a time when our economy is facing headwinds and companies are struggling to remain competitive. Don’t do [acordo com] Mercosur is a terrible mistake from a political, economic and sustainable development point of view”, said Santos.

A commission spokesperson said the EU and Mercosur are engaged in intense and constructive discussions with the aim of finalizing a political, cooperation and trade agreement as quickly as possible.

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_{What is the agreement?
Agreement will facilitate trade between Mercosur and the European Union, eliminating import taxes for more than 90% of goods traded between the blocs after a transition phase. It also plans to facilitate cooperation instruments in economic, social, environmental and industrial development}

_{Why is it important?
The agreement involves 31 countries and promises to help deepen relations with Brazil’s second trading partner and its main foreign investor. When completed, it is expected to form one of the world’s main trade areas, involving around 750 million people and 25% of the global economy.}

_{What will be the main impacts?
The CNI (National Confederation of Industry) estimates that more than 6,600 products will no longer have import taxes charged by the EU, and that 95% of all industrial goods will have import taxes zeroed within ten years}

What’s left to start in earnest?
The agreement needs to be ratified, but it still comes up against new environmental conditions requested by Europeans, as well as disagreements from the Brazilian government regarding damage to the country’s reindustrialization