The EU closed in 2019 with Mercosur (Argentina, Brazil, Paraguay and Uruguay) the largest trade agreement in the history of the community bloc. The pact called to liberalize trade between two blocs that add up to 710 million inhabitants was negotiated against all odds for 20 years and was signed in the midst of a current of protectionism encouraged by Donald Trump. Unfortunately, several European countries, led by France and Austria, have reneged on their commitments and threaten to block their ratification. The liberal government of Emmanuel Macron in Paris and that of Sebastian Kurz (a coalition of conservatives and greens) in Vienna argue that the pact does not include sufficient guarantees on the fight against climate change and that, among other disturbing aspects, it could encourage Brazil Bolsonaro to continue with the deforestation of the Amazon by favoring agricultural exports.
The environmental concern is legitimate. It is correct to understand that the EU must promote the global fight against climate change and that trade policy is an instrument for this. The European Commission has offered the possibility of strengthening the link between the agreement and global objectives to combat global warming. But the resistance of France, Austria and their allies (such as Belgium, Ireland or the Netherlands) to facilitate a negotiated solution shows that, in some cases, concerns about the climate hide protectionist impulses or electoral interests. A derailment would be a serious economic and political error, and could also throw the Latin American bloc into the arms of much looser relations in the environmental sphere.
In economic terms, the EU has enjoyed an uninterrupted trade surplus with Mercosur since 2012. The agreement will allow to intensify the relationship with the elimination of 90% of the tariffs that now bear on European goods that arrive in the four countries of the organization. In return, the EU offers facilities for agricultural and livestock exports in a gesture of reciprocity. The opening scares the French agricultural sector and the Irish rancher. But it must be remembered that the entry of beef without tariffs is limited.
In political terms, the strengthening of ties with this regional group sends a signal to the entire Latin American community, whose geostrategic importance is often underestimated by the EU. This is not only in the obvious interest of Spain and Portugal. Brussels cannot afford to lose such an important potential ally on an increasingly complex world game. But, in addition, the global reputational damage that the EU would suffer when burying a pact signed by its representatives must be considered, and that, if the EU gives up ground in Mercosur and the rest of the continent, powers like China will fill the gap. It is clear that, in that case, the commitment to the environment would not be a priority.
The IMF has already warned that the pandemic threatens another lost decade for the Latin American economy, which will lead countries in the area to seek stable economic partners. The pact with Mercosur is an adequate response to that demand. It should be saved.
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Eddie is an Australian news reporter with over 9 years in the industry and has published on Forbes and tech crunch.