EU-Mercosur agreement: Don’t dream it’s over

Find hereafter the article on the Mercosur agreement , written by FIPRA Special Advisor John Clarke, as published by Borderlex on 10/12/24

Ultimately the fate of the recently sealed European Union-Mercosur agreement will not be about beef or poultry or sugar. It will depend on how deftly the EU navigates difficult political currents in the next five years.

On the grounds that all major trade negotiations deserve their own theme tune, what better for the Mercosur trade agreement than Crowded House’s great song Don’t Dream It’s Over?

For it certainly isn’t.

The announcement by smiling South American heads of state and European Commission president Ursula von der Leyen of the conclusion of negotiations of an EU-Mercosur partnership agreement marks just the start of what will be a long and painful process leading to ratification at the earliest in 2026. So it’s premature to break out the champagne or knock back the caiparinhas.

Let’s look at the road ahead. The concluded agreement – which also covers political cooperation and development support as well as free trade, was concluded politically on Friday (6 December). This step simply means that the two sides agreed that negotiations are done and the text is stable. Cue the photographers.

It is the second time the agreement was concluded. This author was present the first time when Mercosur ministers and then-commissioners Cecilia Malmström and Phil Hogan jubilantly hugged one another on the 12th floor of the Berlaymont building in Brussels following final late-night haggling over beef and sugar quotas. Yes, even Hogan and Malmström hugged each other… mark the date: June 28 2019.

The next step is ‘legal scrubbing’ followed by translating the agreement into all EU languages.

The legal check is largely done, given that most of the text was agreed five years ago, while the newly added protocol on sustainability has also done the legal rounds.

But translation will take some four to five months even with computer assistance: the commission’s translation service is notoriously reluctant to touch any document unless it’s as scrubbed and pristine as a newborn baby.

Add to that some to-and-fro’ing between Brussels and Mercosur capitals to align the English, Spanish and Portugese versions and one can predict the agreement will only be ready for adoption by the commission in the second quarter of 2025 at the earliest.

Then the real heavy lifting begins.

The commission will approve the agreement, although this will be an early and major test of collegiality. Several commissioners will have to leave their passports at the famous door and vote for or abstain on an accord their nominating countries vehemently oppose.

In sending the agreement to member states, the commission will have to decide if to maintain it as one single agreement that includes political cooperation, or to spin off the trade capsule of the Mercosur agreement from the mother-ship.

The agreement as a whole as it stands requires ratification by all member states’ parliaments – and some regional ones. To avoid a repeat of the debacle over the Canada CETA agreement, which is still not ratified by member states and hence in a precarious position, the commission could seek to fast-track the trade capsule’s adoption as an ‘EU-only’ agreement to circumvent approval by national legislatures. It took the commission two years to decide to do this with the FTA with Singapore.

It is clear to this author that the commission must propose a split as this is the only way the FTA can be adopted in our lifetimes. But the decision is controversial – easily painted by lobby groups and opponents as undemocratic. The Wallonian parliament will be up in arms!

On to the Council. Several EU member states, when they receive the text of the agreement, will be ambivalent about splitting, given the risk of domestic pushback. In a final ironic twist of the knife, a decision to split the agreement, because it trespasses into national political competences, needs unanimity in the council.

It will be a challenge for those member states opposing the agreement – France, Poland, Austria, Netherlands, possibly Belgium – to agree a split that would only accelerate the entry into force of an agreement they claim not to want. It’s classic catch-22, not unlike the requirement in the World Trade Organization for a consensus to waive the consensus rule!

It is genuinely difficult to see how the council will approve the agreement unless this group of member states – who will not be able to muster a blocking minority – demonstrate real statesmanship and admit what they already know deep down: that the Mercosur FTA will benefit them economically and constitute a geopolitical necessity in a world where Europe has diminishing clout. Abstention may be their exit card…

In a best-case scenario, the split agreements will receive council benediction in autumn 2025 to be sent to the European Parliament for assent.

France and others will need major face-savers to accept the agreement going forward: at the very least an explicit commitment to implement seriously the sustainability chapter, independent verification of this, the possibility to pull the plug if things go awry, AND money for any affected farmers.

All eyes will then be on the 2027 Multiannual Financial Framework, whose preparation will begin early in 2025, to see if any money is earmarked for farmers.

And let’s not forget the Mercosur states themselves who will again have to be patient bystanders. They will have to weigh their anxiety to get the trade concessions they won as soon as possible, which is only feasible with a split, against a fear that the political cooperation agreement gets kicked into the long grass or languish in national parliaments for years.

Mercosur needs this cooperation volet to help implement onerous sustainability rules in the trade agreement. So they will need reassurances and a clear timetable for the adoption of the Political Cooperation Agreement at the same time as the spinned-off FTA.

This tortuous process will unfold against a backdrop of raucous farmers’ protests across the EU against the alleged onslaught of Mercosur beef, sugar and poultry imports.

Europe’s main farm lobby group Copa-Cogeca have already predicted – some might say menaced – protests as soon as today outside the Council and beyond. This is nine months too early but a taste of what to expect at the key chokepoints in 2025 and beyond.

I predict vehement protests early next year once the new agriculture commissioner’s advisory body starts to meet. The Mercosur agreement, regrettably, risks hobbling that body’s work from the start and infecting commissioner Hansen’s 100 Days masterplan for agriculture.

Anti-Mercosur sentiments may also stymie the commission’s attempts to conclude much-needed FTAs with Australia, India and others.

And if a marriage of convenience emerges – again – between farm groups looking to stop imports, and NGO’s campaigning against deforestation or lower production standards in the Mercosur countries, then the European Parliament will face an agonizing six-months debate before voting the agreement up or down in Strasbourg. MEPs cannot amend it.

All this drama despite the fact that imports of sensitive commodities represent a tiny fraction of EU consumption. All this despite the fact that the application to Mercosur exports of the EU’s new deforestation regulation and corporate sustainability due diligence directive will de-fang previously controversial sustainability commitments in the agreement.

Lenny Kravitz understood the dynamics of trade deals. So we are now in late 2025. How will the parliament react? As ever the key is held by the European People’s Party, the self-styled party of the farmers yet whose leader yesterday praised the agreement as good for Europe.

One hopes the EPP will stay positive, in the expectation that the other large group in parliament the centre-left S&D will be divided, centrist Renew Europe the same, whilst right-wing ECR is broadly in favour.

Mercosur will be a serious test of how the parliament squares its pro-growth, pro-competitiveness vocation with its populist and protectionist impulses. A conflict which we will see across much of the parliament’s work for the rest of its mandate.

A last musical byline – the song I want at my funeral.

Ever optimistic, I continue to think it possible that the Mercosur agreement could enter into force sometime in mid to late 2026, if the commission presents it honestly as requiring trade-offs, like all difficult policies, and if EU member states prioritise the political value of integration with the world’s sixth biggest economy and democratic region.

In terms of the trade concessions, which will be phased in over seven years, we thus looking at 2033-35 for their full application.

Ultimately  the fate of the agreement will not be about beef or poultry or sugar – they are proxies.

It will rather depend on how deftly the EU navigates difficult political currents in the next five years, how compelling are the arguments it makes in favour of cementing relations with South America at a time of increasing Chinese hostility and US unreliability, and whether our societies will continue to believe in the EU’s democratic legitimacy and power for good.