Mercosur members eye sealing of ‘historic’ free-trade deal with EU

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Brazil, Argentina, Uruguay and Paraguay are hoping to announce a blockbuster trade deal with the European Union at a regional summit Friday after a push by Brussels to get the long-delayed accord over the line.

The deal between the 27-nation EU and the four founding members of South America's Mercosur bloc would create the world's biggest free-trade zone.

But it has been dogged by resistance by France – especially its famously militant farmers, who fear it would bring unfair competition.

The European Commission, which determines trade policy for the whole EU, has launched a renewed push to definitively seal the deal.

Germany and Spain in particular are pushing for a swift completion of the pact, which would bring benefits to Brazilian beef producers and German car manufacturers, among others.

'Essential'

German Foreign Minister Annalena Baerbock said Tuesday it was "essential" for the EU to clinch an agreement this week, calling the summit of Mercosur leaders in Uruguay "probably the last opportunity" to do so.

Brazil's left-wing President Luiz Inácio Lula da Silva, whose country dominates Mercosur, is also pushing for the deal to be finalised.

"I intend to sign this agreement this year," Lula said last week, brushing aside France's misgivings.

The European Commission, however, has not announced any plans for its chief, Ursula Von der Leyen, to travel to the summit.

Her task of navigating resistance to the deal was made more difficult last week when Poland, another of Europe's big farming nations alongside France, also came out against it as bad for "Polish farmers and food security."

France and Poland argue that their food producers would be penalised because they are held to more stringent environmental, sanitary and labour standards than their South American counterparts.

They need to forge a blocking minority of at least four countries representing 35 percent of the EU's population to prevent the trade deal from happening.

South American farmers accuse them of protectionism.

'Critical moment'

In a sign of the rising tensions over the deal, Brazilian meat suppliers last week halted deliveries to national stores owned by the French supermarket chain Carrefour.

That was prompted by Carrefour's CEO Alexandre Bompard vowing not to "sell any meat coming from Mercosur" in Carrefour's French stores, despite such sales already being minimal.

The EU and Mercosur states reached a draft deal in principle in 2019, after two decades of negotiations, but it was never ratified due to EU concerns about the climate policies of then far-right Brazilian president Jair Bolsonaro.

Uruguay's Foreign Minister Omar Paganini has called the Mercosur summit a "critical moment" in the negotiations on a "historic" accord.

The accord would gradually reduce tariffs and quotas on trade between the EU and the four founding Mercosur countries, which together count more than 740 million people, and a combined GDP of US$21.3 trillion, according to the World Bank.

EU leaders in favour say Europe needs to get the deal done to secure new markets in Latin America in the face of growing competition from China, and to compensate for potential US tariff hikes when Donald Trump returns to the White House.

Milei eyes US deal

The summit will be the first for President Javier Milei, a fan of US President-elect Trump.

Like Uruguay, Argentina is pushing for Mercosur's rules to be loosened to allow member states to negotiate bilateral deals with other countries outside the bloc.

Milei, who was the first foreign leader to visit Trump at his Mar-a-Lago resort following his election win, is notably pushing for a free-trade deal with the United States.

Foreign Minister Gerardo Werthein recently warned that the bloc should "not be a corset that constrains you and does not allow you to grow."

Analysts say failure to do a deal with the EU could give Milei a reason to walk away from Mercosur.

"Leaving is not plan A," an Argentine government source told the country's Clarín newspaper, while admitting that in the absence of the bloc striking free-trade deals, Argentina could "evaluate leaving."

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