EU-Mercosur free trade agreement raises eyebrows

The European Union (EU)-Mercosur (an economic bloc comprising Uruguay, Paraguay, Argentina, Brazil) free trade agreement was signed by EU Commission President Ursula von der Leyen and the presidents of the four South American countries at Montevideo, the Uruguayan capital on Friday. The farmers in these four countries cheered the agreement because it would open up the vast EU market for their produce.

The agreement has accepted the standards, mainly to do with climate change and environment, followed by the South American countries. One of the countries that is firmly opposed to the pact is France, whose farmers have been protesting the absence of tariffs within the EU, and now they fear more competition from the South American farmers.

France’s Minister of Trade Sophie Primas said, “Today is not the end of the story. This only commits the commission, not the [EU] member states.” The agreement has to be ratified by 15 of the 27 EU member states and it has to be passed with a simple majority in the European Parliament. Germany and Spain welcomed the agreement because they see a big market, especially cars, in the South American market. German Chancellor Olaf Scholz said in a social media post, “After more than 20 years of negotiations, the Mercosur countries and the EU have reached a political agreement...This will create a free market for more than 700 million people along with more growth and competitiveness.”

Free trade has been on the retreat for a nearly a decade now, especially after the 2007-08 financial meltdown in the Western markets. Developed countries have been raising tariff barriers in contrast to the earlier era when the developing countries tried to protect their industries and markets through trade barriers.

But Ursula von der Leyen is a firm believer in free trade as well as the crisis of climate change. She explained the rationale of the agreement: “This agreement is not just an economic opportunity. It is a political necessity. I know that strong winds are coming in the opposite direction, towards isolation and fragmentation, but this agreement is our near response.”

She responded to the concerns of the European farmers. She said, “To our farmers, we have heard you, listened to your concerns, and we are acting on them. This agreement includes robust safeguards to protect your livelihoods.” Brazil President Luiz Inacio Lula da Silva defended the agreement saying, “After two years of intense negotiations we now have a modern and balanced text that recognises Mercosur’s environmental credentials and reinforces our commitment to the Paris Agreement.”

The agreement might face rough weather before it is ratified in the EU and goes through the European Parliament, but the agreement will bring benefits to Europe as well as South America, and it pulls in South America into the dominant Western free trade market system.

There is a struggle in South America whether it is part of the Global South or does it belong to the European-American network. Many of the leftist leaders of South America feel a sense of fraternity with the developing countries in the Global South.

The EU-Mercosur free trade agreement pushes a wedge as it were between South America and the rest of the Global South. There is no similar free trade market either in Africa or in Asia. The ASEAN (Association of South-East Nations) is an exception because it is a free trade zone but it excludes the Far East, South and West Asia as well as the whole of Africa. It is also a fact that Asia is not a cohesive single unit because of its vast diversity. There is much political and economic diversity between Europe and South America.