European Parliament Pushback Threatens EU-Mercosur Trade Deal

The European Parliament’s recent pushback against the EU-Mercosur trade agreement has created uncertainty surrounding its anticipated signing in December. This response, despite proposed safeguards aimed at protecting European farmers from increased imports, has raised questions about the viability of the deal. Key delegations, including representatives from Ireland, Poland, France, Bulgaria, and Romania, rejected efforts to accelerate a vote on the safeguards, complicating the timeline for a formal signing by Ursula von der Leyen, President of the European Commission, scheduled for December 20, 2023.

As the European Union navigates these challenges, it faces increasing pressure from the United States, which is rapidly finalizing trade agreements with several Latin American countries. The Trump administration recently announced framework agreements with Argentina, Guatemala, El Salvador, and Ecuador. This strategy aims to shift trade dynamics and counter the influence of the EU and China in the region.

The newly elected President of Argentina, Javier Milei, is in a precarious position. His government has received financial support from the Trump administration, yet Mercosur’s rules require consensus among member nations for external trade agreements. Consequently, Argentina might have to decide between a new deal with the United States or maintaining its commitment to Mercosur. A finalized agreement with the US could undermine Argentina’s relationships with its Mercosur partners, potentially jeopardizing the EU deal and impacting Brazil, the lead nation in the group.

The EU-Mercosur agreement holds substantial promise for European exporters, particularly those from Ireland. With a population of approximately 250 million, the Mercosur region represents a significant opportunity for trade expansion. The deal is expected to reduce tariffs on crucial Irish exports, including machinery, currently facing tariffs between 14% and 20%, and pharmaceuticals with tariffs up to 14%. Moreover, tariffs on EU food and beverage exports, such as wine, chocolate, and spirits, are set to be phased out, while new quotas will facilitate increased EU dairy exports, including cheese and milk powder.

With projections indicating a nearly 50% increase in agri-food exports to Mercosur, the agreement could significantly bolster the EU’s agricultural sector, especially as markets in the US and China face increased uncertainties. The EU plans to eliminate tariffs on 92% of imports from Mercosur over a ten-year period, highlighting the potential economic benefits for European exporters.

Despite these advantages, the Irish government has expressed concerns regarding the deal, particularly about safeguarding its domestic agricultural market from a sudden influx of products from Mercosur. To advance the agreement, ratification by at least 15 member states, representing 65% of the EU population, is required. While Ireland’s opposition alone cannot derail the deal, it could complicate proceedings by requesting a legal opinion from the Court of Justice of the European Union. Such a move could delay the approval process, as the court is not known for expeditious rulings.

For the EU-Mercosur deal to be finalized successfully, a series of critical steps must occur seamlessly. European Members of Parliament (MEPs) need to approve additional safeguards, followed by the Council’s endorsement of the broader agreement, culminating in the Commission’s formal signing. As Ursula von der Leyen prepares for her trip to Brazil, the responsibility lies with the Irish government to ensure that their actions do not hinder this pivotal trade agreement. The stakes are high, and the potential benefits for EU exporters hang in the balance as negotiations continue.