Ursula von der Leyen and the leaders of Mercosur /Creator: Dati Bendo/ EC/DATI BENDO; European Union, 2024New reports on the Mercosur agreement with the European Union appear all day. The headlines mostly scare small speaking, emotional slogans, and any aspects of the substance are frequently overlooked. The mainstream discussion around the agreement usually skips the wider economical context, which is crucial for both parties. It is worth to halt and look at the situation that gives us insight into the interests of the 2 continents. Who can gain and who can lose?
Members of the European Union are actively discussing the Mercosur trade agreement. In order to be able to thin on the subject, it is crucial to explain what is behind it first. Mercado Común del Sur is from the Spanish "South Common Market", established in 1991 by an global economical organization in Latin America. It consists of Argentina, Brazil, Paraguay and Uruguay, and from 2024 besides Bolivia. In theory, Mercosur besides belongs to Venezuela, practically – it has been suspended for almost a decade.
On 28 June 2019, Mercosur and the European Union concluded negotiations on a trade agreement, on 6 December 2024 and agreed fresh commitments for sustainable development. This agreement would strengthen political, economical and cultural ties, abolish duties on any products and aid fight climate change by implementing the Paris Agreement. According to the European Commission, the second assumes different commitments: both sides would accomplish climate neutrality by 2050, the EU would reduce by 55% interior emissions by 2030 compared to 1990, and Brazil would halt illegal deforestation, inter alia, in its part of the Amazon. However, in public discourse, the top emotions are not caused by global warming, but by possible profits and losses of individual countries.
Southern market
For Argentina, Brazil, Paraguay and Uruguay (Bolivia, as a fresh associate of Mercosur, the agreement with the EU is not yet covered) a trade agreement with the European Union would mean that exports of meat, natural materials and agri-food could be increased. It is besides an chance to attract abroad investors and modernise manufacture and agriculture. It should be noted that Brazil and Argentina have the most to gain. It is with them that the European Union can enter into closer trade relations. According to the global Monetary Fund, Brazil's GDP expressed in the purchasing power parity in 2023 was over $4 trillion and $101 billion, and Argentina was little than 1 trillion 240 billion (for the context Polish GDP was about 470 billion higher than Argentine). The economies of Paraguay and Uruguay are considerably smaller; the GDP of the first in 2023 is over 117 billion, and the second – over 103, so these countries do not have a comparable force. Although the difference in the possible of the Mercosur countries is apparent, the agreement would give everyone an chance to grow in economical improvement and increase their presence on the European market, alienating them from Chinese influence. They would gotta meet EU environmental and production standards requirements.
Conflicted Europe
The agreement would make profits for Mercosur agriculture and the European Union industry. At first glance, the situation does not seem complicated: those who sale advanced processed goods gain more than those who offer low-margin natural materials and agricultural produce. The EU should so work better on this. However, this is the issue of the individual economies of the associate States.
Without doubt, Germany would have benefited – the reductions or abolition of duties negotiated last December were perfectly tailored to our neighbour due to the fact that it needs a marketplace for its automotive, chemical and pharmaceutical industries. Similarly, with the second loudest supporter of the agreement, Spain, which expects a strong increase in exports to Mercosur and the creation of thousands of jobs.
On the another hand, the opposition was expressed by countries specified as France and Poland. Countries with crucial agricultural sectors are afraid of problems. Although the EU organization stresses that Mercosur agricultural products will gotta meet European standards before entering the market, skeptics uncertainty whether it is practically possible to guarantee these standards. European agriculture (including Polish, mainly made up of tiny farms) will most likely gotta compete with cheaper, possibly lower-quality large-scale South American agriculture. For the average consumer this may mean lower prices, but besides possible wellness problems. On the another hand, the question of how much the agreement will actually change the current state of affairs. Brazil is already the largest exporter of agricultural products to the European Union and products imported under preferential customs conditions from South America would represent a fraction of the overall request (e.g. chicken exports would be 1.4% of European consumption).
The planet is watching
In divising the EU-Mercosur agreement, it is besides worth looking at global policy. Supporters of the agreement item cultural, linguistic and spiritual similarities between the population of the 2 regions, seeking to tie Europe to Latin America. The activity of Troll farms in the EU or most likely commissioned by Russia to blow up tracks in Poland is an impulse to act. In a planet where the US has ceased to be a certain ally and China has consistently expanded its economical and technological influence, Europe is under expanding force to strengthen its own autonomy and diversify its partners. Similarly, Brazil and the another Mercosur countries do not want to become full dependent on China. strategical convergence between the EU States and the confederate Common marketplace can strengthen the positions of both organisations internationally. Brazil's oil reserves are besides crucial to the European economy.
However, geopolitical instability is not only a reason for seeking fresh allies, but besides for interior improvement – the EU should not be besides dependent on food from Latin America. It is worth continuing to support local businesses. Protection mechanisms specified as the compensation fund (approximately EUR 6.3 billion) and support for farmers under existing Common Agricultural Policy instruments, including digitisation and training, are proposed.
The Mercosur agreement is inactive in question and gives emergence to expanding emotions. erstwhile observing the situation, remember to look at the substance from different perspectives – so as to have the fullest image of the whole. Whether the agreement enters into force (and if so, in what form), it will affect the economy and policies of the European Union and the confederate Common Market.
Paulina Zielińska
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