Not even a century has passed: what prevents the marriage of South America and the EU
The European Union and MERCOSUR signed an agreement that had been negotiated for a quarter of a century, and almost immediately sent it to court. The creation of the world's largest free trade zone is on pause again. Experts are convinced that Brussels finds itself in a situation where any decision leads to losses. The launch of the deal threatens a revolt of farmers and a crisis, and delay — loss of image and loss of trust of partners from South America. What the EU will choose is in the Izvestia article.
A quarter-century-long deal
The South American MERCOSUR bloc was created by the leaders of Argentina, Brazil, Paraguay and Uruguay. Since the early 2000s, these countries have been discussing with the European Union the possibility of uniting markets and creating a free trade area. And now, after 25 years, the deal has finally been signed.
The signing ceremony of the free trade agreement between the European Union and Mercosur
"We are choosing fair trade instead of tariffs, we are choosing productive, long—term partnership instead of isolation," European Commission President Ursula von der Leyen announced on January 17.
However, the triumph was short-lived. A few days later, the process was put on pause: the European Parliament appealed to the EU Court of Justice to verify whether the agreement complies with the legal framework of the union. 334 deputies voted for the legal request, 324 against it.
There are several complaints about the document. It is divided into political and commercial parts: the first is subject to ratification by national parliaments, while the second must be approved only by the European Parliament. In fact, this makes it possible to circumvent national legislative bodies. In addition, the deputies fear compensation mechanisms in favor of the MERCOSUR countries and a possible weakening of standards in the field of ecology and consumer protection.
The decision on additional verification of the treaty caused a split in Brussels. German Chancellor Friedrich Merz was most indignant about this. He insists that the agreement is "fair and balanced" and necessary to accelerate Europe's economic growth. But critics of the document are convinced: it undermines the competitiveness of local producers.
Now the court will sort out the details. According to Evgeny Shatov, a partner at Capital Lab, if the proceedings lead to the cancellation of the agreement, this will become an extremely problematic scenario. In this case, the European Commission will either have to completely rewrite the treaty or split it into parts, which will delay its entry into force for years.
"But even without a formal refusal, delaying the review carries serious risks," the analyst told Izvestia. — First of all, a dangerous precedent is being set: major EU trade deals can actually be blocked through the courts, which undermines Brussels' position in future negotiations. Secondly, the pause strengthens the eurosceptics and protectionists, who use it as proof that the European Union is unable to manage the process. And finally, there is direct economic damage: European companies are losing time and the advantages of the first move in the MERCOSUR market.
Agrarians versus industrialists
Protests have been raging in the EU since last autumn. On January 20, more than 4,000 agricultural producers from France, with the support of colleagues from other countries, arrived in Strasbourg on tractors and effectively blocked the building of the European Parliament. They demand one thing — to cancel the deal with MERCOSUR.
Farmers' concerns are understandable. Almost half of EU imports from the countries of this association are agricultural products. If you put it on the market on benefits, then it will be extremely difficult to compete with it.
— South America is capable of flooding Europe with cheap agricultural products: There are giant agricultural holdings, cheap labor, and economies of scale," public commentator Andrei Starikov explains to Izvestia. — European agriculture is expensive because of taxes, social guarantees, quality and environmental requirements. It has not been working according to market logic for a long time and will not be able to compete with South American farmers. In the case of a deal, small farms will go bankrupt within months, while large farms will reduce production and staff.
Moreover, even formally limited import volumes are perceived as a threat. Thus, the agreement provides for quotas: 99 thousand tons of beef with a reduced duty (about 7.5%), 180 thousand tons of poultry meat, as well as separate parameters for sugar and ethanol. Across the EU, these volumes look manageable, but for some countries and regions they pose the risk of being squeezed out of the market, Evgeny Shatov tells Izvestia.
— This hits those who depend on livestock and low—margin products the hardest: France and Ireland for beef, Poland for poultry, partly sugar and ethanol, as well as countries where the agricultural sector has a disproportionately large political influence and a high share of employment in the regions. It is no coincidence that these states were part of the opposing camp and publicly warned that local farmers could find themselves in a vulnerable position due to cheap imports, the expert points out.
But the interests of the Union countries differ. If the EU mainly receives agricultural products, then machinery and transport equipment go in the opposite direction. For the European industry, this deal opens up access to a large market. Therefore, Germany and other industrial countries are lobbying for the early entry into force of the agreement.
However, in the short term, MERCOSUR itself looks like the main beneficiary, according to Shatov. He gets an understandable and solvent market for agricultural products, where even limited quotas and tariff reductions are quickly converted into export earnings.
"The EU benefits over time: the reduction of duties on industrial exports is being implemented gradually, and the effect depends on the investment cycle in South America and the ability of European companies to compete with China there," he concluded.
Trust issues
The situation around the frozen deal clearly shows how controversial this project turned out to be from the very beginning. He tried to combine economic calculation and political ambitions, and it was this ambivalent content that became his weak point, Arthur Leer, vice president of the Association of Exporters and Importers, said in a conversation with Izvestia.
— The European Parliament's attempt to appeal to the court only underlines that at the stage of preparation, not enough in-depth work was done on the consequences for the domestic market. This is not about a formal review of the legal formulations, but about understanding how the agreement will integrate into the already established economic landscape of the European Union and who it will affect first," he notes.
At the same time, delaying the process has negative consequences. This increases the sense of uncertainty and undermines the EU's position in Latin America, where partners are closely monitoring Brussels' ability to follow through on initiatives.
— Against the background of general international tension and difficult relations with the United States, the European authorities find themselves in a kind of impasse, trying through judicial mechanisms to give legitimacy to something that was not initially worked out in sufficient depth. In this sense, almost any development scenario has systemic consequences," the expert added.
The negative effect created will increase, Shatov agrees. The EU looks like a partner that has been negotiating for years, but is unable to overcome its own internal contradictions. And this directly plays into the hands of its competitors.
— China offers the region fast infrastructure projects and guaranteed demand without political conditions, while the United States offers more flexible bilateral arrangements. Against this background, the European Union, with its complex procedures, judicial checks and internal protests, looks like a slow and unpredictable player," notes Artur Leer.
If the pause drags on, Latin American countries will begin to adjust long–term trade and investment strategies, and the EU-MERCOSUR agreement risks turning from a potential "strategic breakthrough" into a symbol of a missed moment, Evgeny Shatov emphasizes. Most likely, Brussels will still bring the deal to implementation, but in a relaxed form — with delays, reservations and compensation mechanisms for vulnerable sectors.
"However, each new delay weakens the geo—economic position of the European Union," the expert warns. — In this sense, the agreement with MERCOSUR has become a test not only of trade policy, but also of the EU's ability to act as a single strategic actor in the world.
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