EU, Mercosur eye early-December trade deal — to France’s dismay

The European Commission and Mercosur countries aim to conclude their long-running negotiations on a trade accord at a summit of the Latin American bloc in early December, people familiar with the discussions told POLITICO.

The renewed push for the finish line comes as farmers are expected to rally against the deal on Wednesday in Brussels, and later this week in France, creating a sense of déjà vu after tractor protests across Europe forced leaders to put talks on ice earlier this year.

Next week’s Group of 20 leaders’ summit in Rio de Janeiro had been viewed as the moment to do a deal that has been a quarter century in the making. But any announcement there risks being overshadowed by the Mercosur countries’ efforts to court China, with President Xi Jinping also traveling to Brazil.

“All the cards are on the table. They want to make sure that an agreement is close so that Ursula doesn’t fly for nothing,” said one person familiar with the EU-Mercosur talks, referring to European Commission President Ursula von der Leyen. This person was granted anonymity due to the sensitivity of the matter.

A round of in-person talks is planned for the week of Nov. 25 in Brazil to close the remaining loopholes, a Commission official said. They declined to give a timeline for the conclusion of the deal but stressed that the Mercosur countries — Brazil, Argentina, Uruguay, Paraguay and newcomer Bolivia — are increasing the pressure to seal it soon.

Uruguay will host a Mercosur summit from Dec. 2-4, when Javier Milei’s Argentina will take over the bloc’s rotating presidency.

The “cows for cars” deal would lift trade barriers and create a common market of nearly 800 million people that accounts for a fifth of global GDP. For its European supporters, led by Germany, the pact is long overdue as China extends its economic footprint across the South American continent and pushes European businesses aside.

“If we don’t do a trade agreement with [Mercosur], then this void will be filled really by China,” incoming EU foreign affairs chief Kaja Kallas said on Tuesday. Between 2020 and 2022, Chinese investment in Latin America increased 34 times, the former Estonian prime minister told a confirmation hearing in Brussels.

Loose ends

The negotiations are not yet concluded, people familiar with the talks said, with issues on public procurement, the environmental sections of the deal and its legal structure not formally closed. Specifically, Mercosur countries are asking the EU for more flexibility and time to give local companies a chance to compete with their EU rivals. Brazil is also eager to shield its local car industry from EU imports, especially of electric vehicles. 

French trade minister Sophie Primas previously told POLITICO that Mercosur countries were in a hurry to deliver on the deal by the Mercosur summit. She downplayed the idea that the EU could challenge China’s hegemony in Latin America via the deal. 

France, fearful of a wave of agri-food imports, succeeded in blocking Mercosur negotiations back in January, just as they appeared to be nearing the finish line. But this time, having lost influence following defeats in European and national elections, President Emmanuel Macron will have a harder time stopping the deal.

More than 600 French lawmakers from France’s two houses of parliament meanwhile issued an appeal to von der Leyen in the Le Monde daily not to do the deal, saying “the democratic, economic, environmental and social conditions are not met for the conclusion and adoption of an agreement with Mercosur.”

Still, having effectively lost its de facto veto over the landmark trade deal, it is also apparent that Paris lacks the ability to muster the qualified minority — representing at least 35 percent of the EU population — that it would need to block the deal when it finally goes to a vote among member countries.

In recent weeks, Paris has launched a diplomatic offensive to convince other EU countries to block the deal. France unsuccessfully tried to convince the Italian government, according to two diplomats with direct knowledge of the file. Rome has defended the deal only shyly so far, fearing that it could become as politically explosive in Italy as it is in France.

Brief encounters

Macron heads to Argentina to meet with Milei on Saturday, en route to the G20 in Brazil, while Italian Prime Minister Giorgia Meloni will visit Buenos Aires on Nov. 20.

While French ministers are publicly opposing the deal and multiplying efforts to rally a blocking minority against it, Prime Minister Michel Barnier has kept a low profile. 

Barnier will meet von der Leyen and the EU’s outgoing trade czar Valdis Dombrovskis in Brussels on Wednesday. The conservative premier is expected to bring up the Mercosur agreement, which he opposes in its current version, his office said.

Critics say that France’s opposition is symbolic and that Paris has already lost the battle. 

“The government says publicly that they are opposed, but behind the scenes, they acknowledge they don’t have the strength and pretend to fight,” said Manon Aubry, an anti-Mercosur French MEP from the radical left France Unbowed movement who is vice chair of the European Parliament’s international trade committee.

“France is weakened on the EU scene following a series of events, and we have our backs against the wall,” she added.

With the deal nearing the finish line, Barnier’s government might instead focus on tweaking it and then claim on its long-standing demands.

For years, France called to embed respect for the Paris climate accord in the deal — meaning that the accord could be suspended if Mercosur countries breach climate goals, and introducing legally binding obligations against deforestation.  

In what looks look like a bid to reassure France, the Commission signaled that it was fighting to take French demands on board in the last stretch of negotiations, although Mercosur countries have repeatedly stressed they would oppose any such sanctions on those provisions.

“These are our two fundamental demands … I can’t see an agreement without these two boxes being ticked, and the Mercosur countries know this very well,” the same Commission official said on Tuesday.

Camille Gijs reported from Brussels and Giorgio Leali from Paris. Additional reporting by Eddy Wax.